What Investment Beginners Really Need to Know About Investing Trading isn't for everyone. Most active investors fail to beat the market's average return. That's because they make a lot of mistakes.
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| What Investment Beginners Really Need to Know About Investing | | There's a lot of excitement around investing—and rightly so. It's possible to build a fortune. But it's also possible to lose your shirt.
If you're just getting started—or if you've tried to start in the past and can't seem to get any momentum going—investing can seem intimidating at first.
There's a lot that goes into it besides your money, after all. Investing also carries with it all the hopes and dreams, and also the fears that you may have.
That's why one of the most important things to do when starting to invest is to actually start. Put some money to work in a company you like, even if you only have a few hundred dollars. Once you've made that commitment, rather than waiting to build up a cash balance of some arbitrary amount like $1,000, you're in the game.
Once that happens, you're able to see for yourself what works and what doesn't work in investing in a way that no article or video can show you with your money truly at work.
And, by starting small, you'll learn from your mistakes with smaller amounts of money at risk. Investors who start by putting a large amount of their net worth into one stock are taking on a huge risk, but by starting small, the invariable losses in investing will show you what went wrong with your investment ideas without permanently holding you back.
Finally, many small investors don't use leverage correctly. While riskier, there are ways to use leverage to improve your portfolio returns without increasing the amount of risk involved. Instead of buying 100 shares, for instance, you could buy one call option.
Sure, maybe for the same money as 100 shares, you could afford 10 call options, but knowing when to substitute options for shares—rather than putting as much as possible into a leveraged trade—can make a huge difference to your investment success.
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