How to Start Learning The Art of Investing

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The art of investing is not just a way to make money, but also the key to long-term financial independence. Today, there are many instruments and directions available to beginner investors, such as stocks, bonds, cryptocurrencies including Bitcoin, and traditional banking products offered by financial institutions, such as Bank of America. However, to successfully master this path, it is necessary not only to understand the basics of investing but also to know the features of each instrument. In this article, you will learn how to get started in the world of investing. You can use https://rates.fm/invest/ to learn more about investing and the best payment instruments.

Training is The First Step Towards Investing

We can say with confidence that without this step, in principle, it is impossible to start investment activities. Regardless of the degree of investor involvement in the process, training will be the main and decisive factor in further steps.

In general, the more you know about the tools and the deeper you understand them, the wider the range of these very tools is for you. Accordingly, the maximum efficiency of your investments will directly depend on your knowledge, skills, and abilities.

Drawing Up an Investment Plan

After theoretical preparation and training, the process of drawing up an investment plan and setting financial goals begins.

Conventionally, it looks like this:

  • I want to save up to buy a car – what questions do I need answers to?
  • How much does it cost?
  • When do I want to buy it?
  • How much am I willing to save monthly to achieve this goal?
  • What percentage of return will help me achieve this?

In general, for a correct calculation, you need to use an investment calculator.

This step is fundamental in all further investment activities – because at this stage, the main guidelines are determined and ways to achieve them are formed. Naturally, after completing this stage, you should already have a habit of saving and putting aside.

Looking at financial goals, you begin to understand the value of the very first investments and will be able to more actively form capital to achieve them.

Studying Investment Instruments

When the goals are set and the necessary knowledge is obtained, and you think that you are ready for the first investments, you should stop yourself and ask the main question – what will I invest in?

The answer to it will be broader than you could imagine.

There are many investment instruments:

  • finance – securities, bank deposits, precious metals.
  • real estate – land, construction projects, equipment;
  • intellectual property – patents, research, education;

Investing minimal funds is possible only in financial instruments. The most popular are:

  • bank deposit – the lowest risks and complexity are minimal, as is the income from this type of investment
  • shares – the level of risk depends on the choice of a specific company that issued these shares, income is possible both in the form of dividend payments and from the growth in the value of the shares themselves;
  • bonds – a debt instrument with a yield, as a rule, slightly higher than on deposits;
  • a mutual investment fund is a form of collective investment, in which the profit is divided among all participants proportionally to the investments. The entry threshold is minimal.
  • precious metals – it is possible to buy both physical metal and various options of exchange instruments.

When choosing specific instruments, do not forget about the strategy. The basis for the choice will be financial goals, level of knowledge, availability of free time, and investment horizons. In general, investments can be divided into two main parameters – investment period and risk level.

According to the investment period, they can be divided into:

  • up to a year – short-term;
  • 1-3 years – medium-term;
  • over three years – long-term.

Choosing a Broker

Completing this stage will help you decide on a partner who will provide you with access to exchange assets, and will also retain a pre-determined commission.

It is important to understand that commissions are the main expense item for any investor and the choice of an intermediary must be approached from the point of view of saving resources and taking into account the range of opportunities provided by the broker.

An equally important criterion when choosing will be the reliability rating of the professional participant, and whether such a participant has a license to carry out the relevant activity.

Portfolio Formation

Often, beginning investors immediately start investing, skipping all the previous steps. Of course, this will ultimately affect the financial results – reducing them or completely destroying all profits.

When you start forming a portfolio, you should already:

  1. Have a financial cushion in the amount of 3-6 monthly salaries;
  2. Form a habit of saving and accumulating;
  3. Learn the basics of investing;
  4. Understand the tools and how they work;
  5. Choose a broker based on your own preferences;
  6. Open an account, knowing which one suits you best.

Your first portfolio does not necessarily have to be large, but it should be diversified by the following characteristics:

  1. Asset types (stocks, bonds, funds, etc.)
  2. Currency (₽, $, €, etc.)
  3. Industry (industry, raw materials extraction, transport, etc.)
  4. Country (USA, Europe, etc.)

The ratio of risky assets to protective assets will also be quite important. For example, with a conservative approach, the share of protective assets (highly reliable bonds) should be 60% or more of the total volume.

If the investor prefers to take more risks for the sake of higher returns, the share of protective assets can be reduced to 20-30%.

Final Thoughts

Learning the art of investing is a journey that requires patience, knowledge, and a willingness to experiment. From the first steps in understanding the basics of the financial market and building a financial cushion, in particular with the help of Aetna products, to choosing reliable tools and platforms, each step helps build confidence and skills. We recommend the Rates.fm service, where you can find a lot of useful information about the internet, crypto exchanges Kraken and Binance, as well as popular payment systems like PayPal.