If you’ve looked for any long-term financial advice in the past, you’ve likely been told that the real key to wealth is investment. However, if you’ve never invested in your life before, it can seem like a tremendously risky field to jump into. Indeed, there is a risk inherent to all investing, but that doesn’t mean it can’t be mitigated. Here, we’re going to look at a few strategies and paths that can reduce the amount of risk, even if you can never wholly eliminate it.
Find some balance in your portfolio
Diversification is a term you’re going to hear a lot in investing and for good reason. It spreads out your risk a great deal. When investing, learning spread betting and stocks and other high-risk high-reward markets are your best bet for making money. However, it’s also a good idea to mitigate the risk of them by having some money in bonds, dividends, and other options. They have more modest returns, but they are safe. This ensures that regardless of the movements of one market, you can ensure you’re still seeing growth in others. Finding the right balance is up to you and how much risk you can tolerate.
Invest in what you know
If you’re looking for a direction in which to balance your portfolio, why not also look at investing in what you know? Learning about investing in property is a much easier and approachable effort to many than learning about a whole host of different markets. It can take longer to see any returns, but those returns also tend to be quite large if the market is good. If you run a business or have some expertise in an industry, you can also look into investing directly in a startup for a share of all the profits. Angel investing is how billionaires like Warren Buffett have made their money. The invest, offer their expertise to improve the business, then sell their shares when they’ve made a success out of it.
Trust those in the know
A caveat before this next piece of advice: never choose investments with a “set and forget” mindset. While you can use the expertise of others to choose investments that are more likely to see a return, it’s a good idea to have your finger on the switch so you can sell as soon as you get worried that it’s a bad investment. That said, robo-advisers are becoming much more popular as they become more sophisticated. If you really don’t have the time to learn about the markets you want to invest in, they can take care of the details for you under your supervision.
Above all else, if you don’t want to feel like you’re gambling your money, ensure you only invest what you can afford to lose. Don’t invest your emergency fund or money that’s set aside for short-term goals. Get to know the markets and the strategies that work for you as you start off small and work your way up.