Mad Rich

Investing for Absolute Beginners 

A lot of people shy away from the stock market for fear of it being too risky; it is indisputable that some risks certainly are present in the market, but they needn’t be a reason to put off a rookie investor permanently. Rather than worrying about the risks of the stock market, potential investors should focus on the likelihood of a good return on their money. Over the long term, the stock market can be very lucrative indeed – that’s why it’s the saving product of choice for pension funds. Over a twenty-year period, for instance, the stock market has a 98% chance of outperforming cash. You might think that 2% worth of risk is not worth your money, but if you invest intelligently then you should really be immune to loss over a long period.  

Remember – Long Term!

If you’re going to head into the stock market with the view of wheeling and dealing various stocks and equities, or even gambling all of your money one company’s stock, then you’re on the road to ruin. You might get exceedingly lucky and find the next Microsoft, but it’s a pointless strategy when the riskless long term potential is so good anyway. Forget making money overnight with stocks, instead you should be able to say goodbye to your money for a period of at least five years - if that’s not possible, stick to regular savings products. 

Don’t Put All of Your Eggs in One Basket

Finding one company and investing every last penny of your savings into it is another risky strategy, and one to be avoided if you want to sleep easily at night. Instead, spread your investments around a number of different companies. Some of the most successful investment strategies are based on buying plenty of different stocks when the market declines, then selling some of them off when the market grows to a certain level. With a single stock, such a strategy isn’t as easy.  

Think About a Fund

Getting a fund is a favourite for many amateur investors. This is largely because it takes the difficult process of individual stock picking out of their hands and passes it on to a professional fund manager. You can open a stock fund with a fairly low lump sum, and then pay some money into it every month – this can be as low as £50 on some funds. You can also choose from a selection of funds, such as emerging markets, FTSE 100 listed shares, or shares on another market. A manager will then buy shares accordingly. Take a look at Legal and General for more on investments such as unit trusts.