2. Start small
If you’re new to share investing you’ll want to familiarise yourself with how it works before you start investing your money. Once you feel ready we recommend you start small by putting a modest amount of money into shares . You might not reap the bigger returns that can come with significant share investment, but at least you’ll get comfortable with trading and understand the risks involved. That way you can confidently make bigger investments later.
3. Start trading from your comfort zone
Investing in shares can deliver good returns but the market is volatile and the value of your investment can fall, which can stress those that feel uncomfortable with risk.
Your attitude toward risk will affect how you invest. Knowing how much risk you are comfortable with should guide your trading decisions.
4. Stay level-headed
If you trade based on fear or overexcitement, chances are you won’t think as rationally as you should. When a stock is doing really well you might think it’s a good idea to sell or if a stock starts plummeting you could feel anxious to quickly get rid of it. This short-term thinking can lead to bad decisions because a market swing today might not be so significant in the long-term.
Learning to stay level-headed and not make knee-jerk reactions will ensure you make informed decisions.
5. Diversify your investments
One of the best ways of mitigating risk in the sharemarket is to diversify your investments. This means that if one investment doesn’t work out, you haven’t put all your eggs in one basket and you’ll be able to minimise the chance of losing money.
Some ways you can diversify are:
- buying shares in several companies rather than just one
- putting your money into different industries or asset classes (effectively safeguarding against a downturn in one industry)
- buying shares in Australia as well as overseas.
6. Be patient
Lastly, shares are a long-term investment and investing in them takes patience. If you’re looking to make quick returns you might be disappointed. A good investing timeframe to work to is around five to 10 years, as this allows for recovery from fluctuations that happen in the short-term.
Get started with share investing
Feeling a little more assured about the world of share trading and ready to get started? We’ve got a range of resources to help: