9 Reasons why you need to learn how to invest yourself and not depend on others
There are thousands of investment specialists who would gladly invest your money for you (for a fee, of course), but are you willing to go for it without even knowing what you are getting into? It always pays off to be prepared. More importantly, when you learn not only what investing is, but how to do it, you will have the best chances of making more money. Let’s find out why learning is a key to success.
- Minimizing Risk
Knowledge is power and this is more than valid in the world of investment. Learning how to make sound decisions will help you to reduce risk immensely. You will be protected from making silly mistakes which can cost you thousands of dollars. Just ask yourself if it is wise to make financial decisions based solely on your hunch, on what The Wall Street Journal says or on what your broker thinks. You are in with your money so you wouldn’t want to invest it without solid reasoning.
- Maximizing Returns
Study the financial markets and their patterns. Learn how to read financial statements and extract information from them. These basic things will help you to run detailed and reliable analysis for choosing the financial products to invest in. You will also benefit from learning how to use different tools for analysis which will help you to get accurate prognosis while saving you time and effort. You will be able to build a portfolio which is diversified enough to allow you to stay on the winning side while keeping risk down.
- Defining Your Own Investment Style
You certainly know the famous phrase, “Nothing personal, just business”. However, you cannot separate your personality from your work as an investor completely. Learning how to do things by yourself will allow you to develop a strategy which suits your individual style and allows you to think clearly putting emotions aside and to make solid decisions.
Are you risk-loving or risk-averse? Don’t give an answer based on impulse, but study your financial situation and your target goals, and more importantly, define how much you can afford to lose. How long is your time horizon? Everyone wants to make lots of money right away, but unfortunately, bigger returns are gained over the long-term typically through stocks so you have to choose wisely. Do your homework to determine where you are heading and what you want to achieve. Don’t be chaotic and come up with an action plan.
- Choosing the Right Professionals to Work with
You can follow the advice of a specialized professional regarding your investment strategies and individual decisions, but how can you be sure who to trust? Brokers do not carry fiduciary duties to their clients. Simply put, they are not legally obliged to act in their client’s best interest, but to adhere to a standard of suitability. Registered financial advisors, on the other hand, do have fiduciary obligations to their clients by law.
When you are well familiar with the investment process and the duties of the different professionals which you can involve, you can pick the right people to work with you. You will be able to monitor their actions and exercise control when required. You will not have to worry about unscrupulous specialists trying to rob you of your money.
- Lowering the Cost of Investing
The more you know about this business, the lower your costs associated with it will be. When looking for a broker, one of the key things is to check their commissions. Ideally, you will be able to sell a wide array of mutual funds and exchange-traded funds (ETFs) without paying any commission. Don’t miss to check out the commissions for trading individual stocks. The lower they are the higher your profit will be at the end of the day.
When hiring a financial advisor, run some analysis to ensure that you will get high value translating in high returns for the money which you pay. As you become more versed and skilled in investing, you can begin investing without using the services of a financial advisor and the advisory services of a broker.
- Investing Isn’t Rocket Science
You hear talks about derivatives, call options and put options, bears and bulls and you think that you can never actually find your way around. Every industry has its jargon and the financial one is no different. However, this doesn’t mean that you will have to swim in deep waters right away.
Learn the basics about stocks, bonds, mutual funds and ETFs first to create your own stable portfolio using the major principle of differentiation and you will get a head start. Grow your knowledge one step at the time and you will have what it takes to expand and manage this portfolio with the right tactics. Remember that your goal is to make money and not to become a stock market expert.
- Being Realistic about Your Expectations
This may not seem like an important element of the big picture, but it actually is. Many people think that investing in financial products will make you a millionaire overnight. They perceive this job, which is based on detailed research and analysis, as gambling – you put some money in and you hope for the best.
The more you learn about the different types of financial instruments and their market performance, the more you will deviate from this view and focus on the actual work which has to be done for deriving the targeted returns. The reality is that even stellar investors have returns of around 12% per year. This may not seem like much, but it’s actually quite an accomplishment given the volatile nature of modern-day markets.
- Learning Is Quickly Accessible and Cheap
You don’t need to sign up for a degree program in finance at one of the Ivy League schools to learn how to invest and actually make money. The web offers a huge variety of affordable resources which are always just one click away. From e-books and online guides to courses and tools, everything which you need is out there. You just need to take advantage of it.
Of course, not all resources are created equal. You need to do some digging to pinpoint the best ones for your needs. Additionally, while the monetary investment is small, you should be prepared to put in a considerable amount of time and effort into learning. The good news is that you can get started even with basic preparation and grow your portfolio along with your skill and knowledge.
- Think of It as Investment in Yourself
You may not earn a huge fortune from investing, but everything which you learn during the process will come in handy in more ways than one. You will be able to manage your personal finances a lot better. You will be shielded from crises in the financial markets which normally affect the income and lives of millions of people. You can readily use the acquired skills in your work to get a better job and to advance in your career. You will still make more money in the end, after all.
What are you waiting for? Star learning how to invest to define your style, to keep risk down and to earn high returns. Come up with a plan and build your investment strategy and portfolio.