The Basics of 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. 

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, we’ve outlined some of the basic principles 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 one's 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 and the higher the chance of facing a downfall. In contrast, the bigger something is the less likely it is to experience exponential growth or failure.

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 maximise your returns in the short to long term by reducing your purchase price.

New to investing and want to know more about the latest research?

What's the difference between investing and trading, and why you need to understand the concept prior to building your investing strategies.
It really comes down to what your investment goal is, how long you have to achieve it, and the risk you are willing to accept in the journey to get there.


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