How To Invest (for beginners)

Ever wondered how you can make your money work for you? Investing! Yes...investing is a best and a great way to make your money work for you. You just have to learn how and here we will help you with that.

1.Build your safety net first!

Creating an emergency fund that can acquire atleast 3 months/6 months will help you
when you are in need of cash like taking risks with your money confidently because you will have something to fall on.
This will even make you a bolder investor and gain motivation on investing more often. A safety-net is a great start.

• You have to make sure your safety-net is liquidative and easily accessible.
• You should not use this money to go to the movies or go out with friends, This money will cover
  expenses such as food, electricity, water and school fees for children (if you have them).

2.Learn about stocks.

A stock is a share of ownership in a business, a stock itself is a claim on what the company owns-it's assets and earnings.

If you buy a stock from a company, you make yourself a part-owner of a business and in this case you can earn dividends from the business.
If the company is doing well, stocks gain value and get expensive but when the company is not doing well, the stocks lose value and prices drop.

3.Understand bonds.

When you buy a bond, you are essentially lending someone money.

Here is an example: You buy a 3 year bond from the municipality for $5000 with an interest rate of 2% then you lend $5000 to a company for 5 years each year the company pays you interest of 3% of $5000, after 5 years the company payedyou back your $5000 with a profit of $1,500.

The longer term you lend, the higher the interest rates and you can have more profits.

Keep in mind that:

The higher the risks, the higher the returns.

4.Learn how to invest in property.

Investing in real estate is very risky but lucrative proposition.
You can choose how you want to play a role- by being a landlord and renting the house or flip houses that are undervalued and give them value and sell it as quickly as possible.
This is a profitable industry for some but it has a lot of risks.

It is not the type of investment that is appropriate for a person without patience because it requires long-term investments goals and it is unpredictable.

5.Buy low, Sell high.

If you want to invest smart, You have to buy low and sell high. This strategy is used by most investors and its still working very well in most cases and you have to know these points when investing:

• Before investing, you have to know when the company stock is undervalued by looking at its P/E ratio, earning growth, profit margins and dividends yield instead of watching YouTube videos on which stocks to buy.
• The price-to-earnings ratio is a most common way to see if the company stock is undervalued or not. It simply divides a company share price by its earnings. For example, if Company X is trading at $5 per share, with earnings of $1 per share, its price-to-earnings ratio is 5. That is to say, the company is trading at five times its earnings. The lower this figure, the more undervalued the company may be. Typical P/E ratios range between 15 and 20, although ratios outside that range are not uncommon. Use P/E ratios as only one of many indications of a stock's worth.
• Always compare the company with its peers and analyse which of the company has a better profit margins, projected earnings and a lower P/E ratios. That can be a great buy!

6.Invest in company's that you understand.

Investing in companies that you already know gives you a right vision of where you will see that company in the next 5 years. This will help you better understand the company's revenue and its success.
This can increase your chances of being successful as long as you don't put all your money in one basket...keep in mind that you have to diversify to avoid risks.

7.Don't buy or sell with your emotions.

Fear of loss can prove to be a poor reason to dumb a stock. This can even affect your success in a long run or you can end up not being successful at all. To be successful you have to conquer your fear and start doing, Losing doesn't mean you don't have to try again. Consistency is a key when it comes to investing.

8.Diversify.

One of the most important things when it comes to investing is to invest in different companies to avoid risks of losing all your money at the same time. This will balance your portfolio from being a disaster.

9.Invest for the long run.

When you are sure about investing, you have to focus on long-term investments and have patience because it takes time to build wealth. You should hold your stocks until the value is high enough to sell and get more returns or keep on holding and build your wealth.

10.Consider on finding a financial advisor.

It could be useful to have a financial advisor that will help you make professional decisions regarding investing or invest for you. Financial advisors can be handy by keeping your money safe and guide you through the way.

11.Re-examine your investment goals and strategies.

When you are young, and saving for retirement it would be appropriate to focus more on stocks rather than bonds because you still have time to go through failure and recover and gain better benefits for your investments in the long run.

When you are about to retire, your portfolio should rather have more bonds than stocks because you can't afford to lose more money which you won't be able to recover in a short-term.