Five Essential Things to Know Before You Start Investing

All this year the main stock exchange in South Africa, the Johannesburg Securities Exchange, has been defying the wider economy in the country which is in the grip of a recession.

In fact back in July of this year it even reached an all-time high. So, with other opportunities seeming limited in the current situation perhaps beginning a career in investment could be the way forward for many.

There was a time when this would be a tricky path to take but the advent of the internet has made it much more accessible for everyone whether they want to invest in stocks and shares, gold or even foreign exchanges – and it’s thanks to the emergence of a number of top trading platforms that make it simple.

But before you set off on, hopefully, the road to wealth there are a few facts you need to know first. So here are a few basic tips for beginners wanting to start investing.

Understand what you’re investing in

When you first start out it can be easy to be attracted to companies you’ve heard of, whose products you like or even ones whose ads you’ve seen on the TV.

But none of these are good reasons for investing in them. What you need to do is research into every aspect of how they are run and how successful they are by looking at their financial information. This is easily accessible and the more information you can have about a company and the South African stock market in general, the better.

“JSE Building” (CC BY 2.0) by Pavel Tcholakov

Regular investment is a secret of success

Just like saving money, the best way to gradually build your wealth is to commit to regular investment. Even if it starts off as a relatively small amount it will soon mount up. Maybe you can set up a separate bank account that becomes your “investment fund” and transfer a sum into it each month that you have ear-marked to invest.

Never borrow money to invest

Something to always avoid is borrowing money to use for investing. Not only will you have to pay off interest on the loan before you start making any profit on the investments you’ve made with it, if the value of your investments falls then it could spell serious financial trouble for you.

Spread your investments

Different sectors perform well at different times so it’s always a good idea to diversify into various areas. That way, when one is not doing so well others will be and you will be spreading the overall risk of investing.

Remember to be patient

The most successful investors know that it’s as long-term exercise so you need to be patient if you want to see them pay off. Investments that appreciate quickly are usually the ones that are the riskiest so it’s better to be cautious and sensible if you want to come out on top in the long run.

Hopefully these five tips will give you some good advice about starting your investment career and you’re certain to pick up more and more knowledge along the way. Then it’s just a question of making some good decisions and enjoying a little bit of luck too. So make the leap into become an investor today and who knows where it could get you in just a few years’ time!