Investment has made ordinary people into millionaires and billionaires and they won’t be the last. Many more people are getting rich and making it by trading and making various investments. Some deal on the stock market, others buy bonds, others prefer buying treasury bills. Most people only see the results of the many investments that people make to become wealthy but fail to see that behind the success lies a certain set of formulas, set of principles and timeless wisdom which guides them to make the best decisions.
Twenty-six-year-old Sandile Shezi became a sort of prodigy wonder when he became South Africa’s youngest self-made millionaire at 23. He achieved this through trading and investing.
Warren Buffet, known for his investment prowess is known to have said that investing is less of brainpower and more of emotional intelligence. This simple advice alone can save you lots of money.
We have studied the top advice from Warren Buffet and other salient investors of all time such as Mark Cuban and Aliko Dangote and distilled them into simple knowledge nuggets for the beginner investor.
Before we get started, know that some of the advice may not be conventional and you may take some time to properly digest the advice.
10 Investment Advice For Beginners from Expert Investors
1. Build a Solid Savings Portfolio. Automate Your Savings. Have an emergency fund
As with everything, a solid foundation is where you start. Investing is not a quick income scheme. It takes time and patience is important. You would need to be secured while you use your money for various investment opportunities as no investment is certain.
Having a solid savings portfolio will firstly ensure that you have money for day to day expenditure and also you have some amount to start investing with.
The easiest and advisable way is to automate the saving process where your bank automatically keeps a predetermined amount for your savings. It could be moved from your general account probably for collecting your salary and paying into your savings or investment account. It also helps to have an emergency, separate from your savings so you don’t have to deplete your savings when something demanding hits.
These two; Savings and emergency funds will give you a secure bed on which to start investing in a calm and natural instead of a panicky and fragile state.
2. There are no Guarantees in Investing but Have a Plan
Investments are all inherently risky. An investment can move from profitable to total loss within seconds depending on the investments that you do. Of course, there are more stable investment packages such as treasury bills and mutual funds.
It is critical to have a plan when you are going into investing. You need to determine your goals and draw a plan to achieve that. If your goal is to build or buy a house in 30 years as a young person, you will invest in different instruments as compared to when you are close to retirement and need more stable investments so you don’t lose your hard-earned money.
It helps you figure out the time you can wait to see results, how much to put in and when to put it in. All of these help in choosing a plan that fits you and helps you achieve your goals.
The stock market is a device to transfer money from the impatient to the patient.Warren Buffett
3. Plan For Retirement Now
Planning for your retirement is very important and you shouldn’t ignore it. Make provision for your lifestyle and inflation. Retirement may seem a long way but the earlier, the better. Also, be sure to consider inflation.
If you are working for a company, you would most likely have a package paid for by you and your employer. Be sure to understand how it works and to be abreast with changes in policies so you aren’t left high and dry when you finally retire with little to take home.
The first thing you must be clear about in your mind is the motive behind your decision. Some of the motives behind a decision to invest back home include the following: the need to cut the burden of constantly sending money home, creating an opportunity for you to return home, creating a “nest egg” for when you retire and return home, and getting a better return than what you think you can get where you areStrive Masiyiwa
4. Discipline, Diversification and Diligence.
Investing takes more discipline than you might imagine. It takes discipline to go with what you know will work than to fall for your fear of loss. It also takes a disciplined mind to pull out when things are getting worse but you feel greedy and do not want to step out of the venture.
The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioural discipline that are likely to get you where you want to go.Benjamin Graham
5. Only Invest in What You Know
Investing in only what you know is important to keeping a good emotional balance and having good returns. If you do not understand it, how then can you be positive about returns? Education and learning are very important to you as an investor. Buy some good books and read.
In an interview with MTV Base, Africa’s Richest Man, Aliko Dangote mentioned that he only invested and put his resources into ventures that he understood. It is often said that investors aren’t risk-averse but I believe the inverse is true. They reduce their risk by greatly understanding what they do. Therefore being appreciated their potential gain and the odds stacked against them.
6. Educate Yourself by Investing in Yourself First
A rejoinder to the previous point is that you must educate yourself. Investment as a field has been in existence for a long time and it has seen several very good investors who give free advice, create training programs and courses, write books or even make content for free which you can learn from.
Jump at every opportunity to learn as it will help you in spotting great but underpriced opportunities that will give you great returns.
Learning will also teach you the skills, attitude and basically how to succeed as an investor. A good place to start might be the Peter Lynch books and Benjamin Graham.
Time is your friend, impulse is your enemy. Take advantage of compound interest and don’t be captivated by the siren song of the market.Warren Buffett
7. Do Not Listen to the Media
The media only reports on the top things that are newsworthy. It isn’t all the wonderful stories and humanitarian projects that they report on. They do what they do, and that isn’t something you want to put on your emotions and money. Try to arrive at your investments by your own understanding of the opportunity and the risk and depend less on investment tips or doomsday stories.
Thousands of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply…and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.Peter Lynch
8. Understand and Leverage the Power of Compound Interest. Invest Long Term
Compound interest is a powerful concept but involves a lot of patience, long-term thinking and a great appreciation for the future. Without these, you will end up paying for compound interest instead of earning it.
Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.Albert Einstein
9. It Isn’t Where or What You Invest in But How Much You Invest
Most new investors focus too much on the investment to pick. But with most investments, the higher investments bring higher returns.
Experts advise that you focus on getting started instead of focusing on getting a golden goose which you may never find. It is okay to start with small amounts as it will help you feel safe while dipping your feet in the markets to see which you can work with.
10. Investing Comes With Waves Of Emotions – Greed And Fear.
Be watchful of the emotions that well up inside you. Know your risk tolerance and stick with investing money you wouldn’t bother unless you are extremely positive about the opportunity, but of course, everybody thinks their bet will win until it doesn’t. Keep risks low and margins high.
A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.Charlie Munger
Bonus Point from Expert Investors
11. Get Started Now. Now…
Just do it.
11 Key Takeaways For the Reader From the Article
- Build a Solid Savings Portfolio. Automate Your Savings. Have an emergency fund
- There are no Guarantees in Investing but Have a Plan
- Plan For Retirement Now
- Discipline, Diversification and Diligence.
- Only Invest in What You Know
- Educate Yourself by Investing in Yourself First
- Do Not Listen to the Media
- Understand and Leverage the Power of Compound Interest. Invest Long Term
- It Isn’t Where or What You Invest in But How Much You Invest
- Investing Comes With Waves Of Emotions – Greed And Fear.
- Get Started Now. Now…