Becoming a successful investor is not something that you achieve overnight and the majority of us start out as nervous novices, until we get the hang of things and gain some much-needed experience.
It would be a good idea to do some research on any financial markets you are interested in, see Money Morning here for some useful data, and you might also consider taking some notice of some investing advice, from the respected advisor and TV host, Jim Cramer.
Learning from your mistakes
Mistakes made when investing your hard-earned money can be both painful and expensive in equal measure, and the Mad Money host Jim Cramer, can speak from experience in that respect.
Cramer hasn’t always been a successful investor and he had to learn the hard way what not to do with your money, so the fact that he has had to go from zero to hero should at least give you an idea that he is committed to providing advice to novice investors that should allow to avoid some of the mistakes he made.
Investing in stocks and other financial products is invariably going to present a steep learning curve while you find your way around things and learn what works for you and what doesn’t.
You may well have to learn from your own mistakes along the way, but here are some pearls of wisdom from Cramer, for fledgling investors who are just starting out.
Savings in the bank
Being young gives you a number of advantages that are worth exploiting when it comes to investment options.
Now if you are heading towards retirement and need to ensure that you have access to some cash that you need in your senior years, you may well want to have some money stashed away in a savings account. But if you are in your early twenties and have your whole life ahead of you, you need to take advantage of the fact that you have time on your side.
Cramer points out that younger investors have a bit more freedom to take some risks, as they will have plenty of time to repair any damage you manage to do with some bad or simply ill-advised investments.
The simple strategy that Cramer advocates is that you can afford to buy into higher-risk stocks with the promise of stellar returns, while you are young, and then adjust your risk-profile and become progressively more conservative the closer you get to retirement.
The other point about being a young saver is that just having some cash in savings account that offers a very modest interest rate, is hardly going to get the pulse racing, so Cramer suggests putting money away into the stock market and treat like a savings account, that might actually reward you with a higher rate of return.
Give yourself a fighting chance
Another bit of advice from Cramer is that it is never too early to start saving for your retirement.
It can be hard to persuade any twenty-something that they need to start saving for their retirement, as that seems so far away in the future it is not something that you can even contemplate, but you will be amazed what an amazingly different retirement you could enjoy if you start planning and saving as early as possible.
If you are not convinced, take a look at a retirement calculator and work out the numbers you need. If you are going to give yourself a fighting chance to make your retirement savings target, just remember that even a small amount of money put away in your twenties has plenty of time to grow, but if you don’t start planning for your senior years until much later, you are going to give yourself a mountain to climb.
Getting the balance right
Although you can take some sound advice from people like Cramer on board, and learn from their mistakes so you don’t do the same thing, you should also try to develop your own investment strategy as your confidence grows.
Everyone has their own risk profile and it could be that you are the type of person who doesn’t want to take excessive risks with your cash, or you could be the virtual opposite, and someone who is prepared to gamble a bit in search of higher returns.
It often pays to create a balanced portfolio for long-term success, so you might want to create a mix of stocks and other investments that vary in their level of risk.
Charles Blaine takes an interest in all aspects of investing, and is a huge fan of Jim Cramer. He enjoys researching, trying, and then writing about investments, whether we’re talking gold, the stock exchange or property!