How To Deal With Your First Investment Strategy


Stock Market Investing Tips For Beginners

The most straightforward first investment strategy is to buy the S&P500 and leave it for the next 30 years. Keep reinvesting your dividends and see it grow at a rate of 6–7% each year. It will grow as much as the market grows. Will the market always grow? In the long run, – Yes. As long as capitalism exists, economies and markets will still grow. If some natural disaster happens or societies descend into chaos, then money won’t be worth anything anyway. In other words, your investment portfolio won’t be your primary concern in that case. But that unlikely five sigma scenario aside is the best possible way. You can quadruple your money in 30 years can go for an index fund.

How To Deal With Your First Investment Strategy
How To Deal With Your First Investment Strategy

Sophisticated First Strategy

If you want to feel more sophisticated, diversify. Either, buy an index fund for the entire US stock market. Alternatively, obtain the S&P500 index to represent the most significant 80% of the US economy. Buy a developed market stock index (EU, Japan) and an emerging market stock index (China, SE Asia, etc.). Buy a global bond index fund, and leave about 10% for a comprehensive REIT index. Check out Vanguard, Fidelity, Schwab, iShares, T. Rowe, etc. They have a bunch of indexes. Choose the ones with the lowest cost of commission.

To back this up with actual research and data, read books. You’ll get the gist to plan your first investment strategy.

Tips To Plan Your Investment Strategy

There isn’t one. Investing takes work. Also, it requires adaption with time as markets respond to new conditions. However, there are a few tips you can follow to help increase your chances of success. The list is not exhaustive. But it is a good starting point for the first investment strategy.

1. Keep your position sizes small. It is not diversification for the sake of diversification. It means that given you don’t know the future. Don’t go so big on something that it will wreck your finances if it fails.

2. Look for opportunities in evergreen market sectors. Or find the offers which are riding a strong trend. Ideally, these are things that people will likely always need in some form. A few examples are medicine, food, science, engineering, etc.

3. Don’t invest any money you aren’t willing to lose. And plan to hold your positions for a very long time. Do not imagine that you will become a day trader. Do not invest any money that you need for living expenses.

How To Deal With Your First Investment Strategy
How To Deal With Your First Investment Strategy

4. Pursue asymmetric returns. Most investments involve risking 100% loss in exchange for a fractional gain. But great investments usually don’t involve risking $1 to make 8 cents. Risking $1 to make $10 is an example of asymmetric return. That doesn’t mean throw money at anything that promises a get quick, productive approach. You still need to control your position sizes. Do thoughtful due diligence. Invest what you’re willing to lose, and choose your positions.

5. Invest in yourself. Doing This is one of the safest ‘first investment strategy’. Investing in expanding your knowledge, skills, and ability to monetize things is one of your best chances to do well with your money.

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