Most people have heard about smart investors who have made their fortune trading in stocks and shares. But when it comes to the crunch, the majority of newcomers to this will feel confused. Reason being there is so many diverse ways you can get involved, and for those not very mathematically minded will struggle at first. But there is still hope. Here I will talk about the easiest ways the standard working class person can get onto the investment profits ladder.
First and foremost, all investing is a form of gambling, there's no doubt about that. And many have lost their homes, families and children because of it. So golden rule number one is to never, ever gamble with bill and mortgage money. There's no silver bullet with investing €" you must make a calculated decision and do your homework before parting with any cash.
Also, before you enter the world of investing, you must first have the ability to configure a personal budget. You know, if you can't manage your own finances, there's no way you'll survive in the investment world. So sit down and list all your regular outgoings €" utility bills, food, transport to work and so on. And don't forget to list other outgoings such as holiday savings, clothes and socialising costs. Then add up the total monthly outgoings and subtract that from your salary income for the month. The figure you calculate is money you have spare to invest. If your result is zero or close, then you'll have to adjust your spending, or find some way to bring in extra income.
Now I have Figured Out How Much I Can Afford to Invest, Now What?
So to invest in stocks and shares, you'll need to buy them regularly, as most people will not have a bulk sum to invest straight away. And to make it worthwhile, you'll need to invest in five to ten different companies or securities at a time. So you could set up a monthly direct debit for each. But for the ordinary person, that amount will not be sufficient enough to turn a decent profit each year. So by far, the best way to get involved on a shoestring budget is to join a mutual fund. This is where you pool money together with other investors and a financial manager will invest your money for you. This way you can get great leverage and reduced risk.
I Still Wish to Build my Own Portfolio of Ten or So Stocks €" What do You Suggest?
Yes, there is a way on a limited budget, but you need to save up a nest egg for your own investment program. And the best way to do that is to open an Independent Savings Account or ISA. The way it works is you set up a monthly direct debit for the amount you can afford to spare. These savings are tax free €" that's right €" you'll pay less tax. And the interest rate means you'll make a few extra pounds on your savings. At time of writing, in the UK the maximum per year is around 11,000. This way you can avoid losing your shirt. By the way €" never ever be tempted to use a credit card or bank loan for investing. This is just silly as the interest you pay on your credit card can eliminate any profit you gain from your investments.
So aim for the longer term and be patient. The get rich quick scheme does not exist €" you won't make millions overnight, unless you're really lucky. Educate yourself as much as you can. Read all the books and eventually you'll become a real master investor. I know at first all the jargon will confuse you. But keep at it, and it will all click together for you, which is the same with most new subject matter. You'll be surprised how the human brain magically understands things once you've read about it a few times.
Neil Harland - Author
First and foremost, all investing is a form of gambling, there's no doubt about that. And many have lost their homes, families and children because of it. So golden rule number one is to never, ever gamble with bill and mortgage money. There's no silver bullet with investing €" you must make a calculated decision and do your homework before parting with any cash.
Also, before you enter the world of investing, you must first have the ability to configure a personal budget. You know, if you can't manage your own finances, there's no way you'll survive in the investment world. So sit down and list all your regular outgoings €" utility bills, food, transport to work and so on. And don't forget to list other outgoings such as holiday savings, clothes and socialising costs. Then add up the total monthly outgoings and subtract that from your salary income for the month. The figure you calculate is money you have spare to invest. If your result is zero or close, then you'll have to adjust your spending, or find some way to bring in extra income.
Now I have Figured Out How Much I Can Afford to Invest, Now What?
So to invest in stocks and shares, you'll need to buy them regularly, as most people will not have a bulk sum to invest straight away. And to make it worthwhile, you'll need to invest in five to ten different companies or securities at a time. So you could set up a monthly direct debit for each. But for the ordinary person, that amount will not be sufficient enough to turn a decent profit each year. So by far, the best way to get involved on a shoestring budget is to join a mutual fund. This is where you pool money together with other investors and a financial manager will invest your money for you. This way you can get great leverage and reduced risk.
I Still Wish to Build my Own Portfolio of Ten or So Stocks €" What do You Suggest?
Yes, there is a way on a limited budget, but you need to save up a nest egg for your own investment program. And the best way to do that is to open an Independent Savings Account or ISA. The way it works is you set up a monthly direct debit for the amount you can afford to spare. These savings are tax free €" that's right €" you'll pay less tax. And the interest rate means you'll make a few extra pounds on your savings. At time of writing, in the UK the maximum per year is around 11,000. This way you can avoid losing your shirt. By the way €" never ever be tempted to use a credit card or bank loan for investing. This is just silly as the interest you pay on your credit card can eliminate any profit you gain from your investments.
So aim for the longer term and be patient. The get rich quick scheme does not exist €" you won't make millions overnight, unless you're really lucky. Educate yourself as much as you can. Read all the books and eventually you'll become a real master investor. I know at first all the jargon will confuse you. But keep at it, and it will all click together for you, which is the same with most new subject matter. You'll be surprised how the human brain magically understands things once you've read about it a few times.
Neil Harland - Author
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