Tips & Tricks on Investing

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There’s one thing I always ask someone who says they don't know where to start investing:

What is it about the companies that you buy goods and services from on a day to day basis that makes you believe they will still exist in the next few years to come?

It may not seem like it at first, but this question relates very closely to the mindset of investing and choosing which companies to consider for your portfolio. When investing, it’s important to understand that growth and long term sustainability are characteristics you’ll want to look for in every investment you make. 

I mean, no one wants to be a loyal client of a store that might close down anytime - the same way no long-term investor would invest in an investment or company that they believe may not stand the test of time. With this in mind I’ve outlined some of the basic principals to consider when starting your investment journey.

 

Know your risk appetite

Keep in mind that when investing in the stock market, you will most likely see the value of your investment regularly fluctuate. These fluctuations are normal and differ depending on the share price and the type of investment you are looking at.

Different investment vehicles may include Exchange Traded Funds (ETF), Exchange Traded Notes (ETN), Bundles, Crypto, Unit Trusts and many more.

How does this relate to your risk appetite?

Think of a diversified portfolio. and spreading ones' risk

 

Focus on growth

Like a consumer who'd describe why they believe a company/brand will still exist in the next coming years, an investor could take the same approach and consider a company's growth potential when deciding whether it’s a good fit for their portfolio.

Remember, the smaller something is, the bigger the chance it has for more significant growth, but also the higher the chance it has of facing a downfall. In contrast, the bigger something is the less likely it is to experience exponential growth or failure.

Learn more about investing in small vs large caps here

Investing R100 in small to large caps

And lastly, get started.

No one knows what the future holds, right? But one thing for sure is that every company listed is trying their level best to become the next leading company in their industry. One of the main reasons for a company to list is to expand and grow.

In closing, investing is probably not as difficult or expensive as you think. With the ability to invest in a piece of a share (fractional share investing) you are able to buy shares above your budget and still enjoy the benefits of being a shareholder in the investment vehicle of your choice. And just like a consumer rushing for those red hanger sales, with investing, share prices also drop, and sometimes this may be at a significant value. The drop in value of a share price may at times present an opportunity to “buy the dip” to maximize your returns in the short to long term by reducing your purchase price.

 

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