How to invest for beginners

Difference between trading and investing

Firstly, it is important to know the difference between trading and investing. Trading stock is very risky as you don’t purchase the actual company and solely rely on the pricing direction, which is rather like gambling in my opinion. You pay money to bet whether the price will go high or low and only 5% makes profits whereas the rest lose money. I suggest you stay away from trading stock if you consider making reliable money unless you are that lucky 5%.

Investment, on the other hand, is buying a share of the actual company, and so you will have your regular profit returned back to you called dividend. However, the risk varies depending on what you invest. For instance, investing in well known reliable company ensure low risk (but likely lower profit returns) and investing in a start-up company are high risk as the company can easily fail although the returns can be very high if it succeeds. Bear in mind that to investing in start-up company is extremely risky and you I suggest not to for beginners!

How to start investing in stocks?

It is pretty simple:

1. Open a bank account for investment (opinional)
2. Open a share dealing account
3. Start buying stocks from the sellers  (if you want to buy it directly from the company, it has to be in the status of ‘initial public offering’ which is not via the broker)

What to invest in?

In terms of investing in companies, I advise you to trade with a reliable company that has been around and is likely to be around. Something that we are likely to use every day, like big phones network companies, popular toothpaste companies, popular insurance companies etc… As for technology companies, those are more competitive and risky.

The are other things you can invest in:

• Mutual funds
• Exchange-trade funds (ETFs)
• Real estate investments

The advantage of investing in funds is the automatic diversity in your portfolio where owing dozens of companies gives you extra security.