We’ve discussed the importance of financial planning, specifically in the uncertain climate of 2020. Our article ‘Patience and Planning Are Key in Uncertain Markets’ asserted that there are a few specific strategies it’s important to stick to during volatile times, and in the midst of uncertain global events. And among these strategies are sticking to your plan and staying invested.
These points primarily relate to the idea of resilience in times of uncertainty. But the idea of sticking to a plan also speaks to a careful approach to investing that far too many traders ignore, even in more ordinary times. With that in mind, and as people look to make sense of the markets moving forward, we want to provide a few tips for how you can go about preparing for investments. Whether you’re brand new to investing or you’re simply seeking a more strategic approach, these steps can help you to ease your way in.
Study the Latest Advice
There is just about limitless educational material out there for investors today. Old books that have been go-to options for decades, newer books by more modern traders, and articles written by successful investors are all accessible at a moment’s notice. While all of these can be valuable though, we’d recommend seeking out particularly relevant, up-to-date advice. This can come from some of the books, but we’d point to podcasts as valuable resources as well. Yahoo Finance has a list of some of the best personal finance options in this category — “So Money,” “Planet Money,” and “InvestED Podcast,” to name a few — all of which can help you specifically with the challenges of managing money in our times. Studying the latest advice can prepare you for the markets you’re facing today.
Try Trading Demos
A trading demo is an excellent way to get some practice with your investments without actually risking your own money. The details of how trading demos can work are laid out by FXCM in a piece that clarifies that you can trade with “virtual money,” acting on live buy and sell prices with no risk whatsoever. And today, this can be done through a number of different websites, software tools, and apps, and in a variety of markets from forex to stock exchanges. It’s still something you should prepare for, because there isn’t much point in using a trading demo without having specific strategies in mind. But once you’ve studied up, a demo can help you to hone your approach and learn what you may or may not do well in the markets. That way, when your own money is on the line in a real investment, you’ll be ready.
Invest Small Amounts
It can be tempting to invest a large sum when you’re starting out, because the more you put in, the more you may stand to earn back. However, there’s a valid strategy in starting out with a very small amount, too. As a U.S. News & World Report put it in an article on this subject, small investments offer an introduction for beginners. In a sense, it’s almost like the next logical step up from a trading demo — a means of gaining more practice with a small amount that won’t constitute significant risk. Yes, it might be frustrating if you do well with a small investment and your return isn’t particularly substantial. But it’s sill a good way to gain experience and confidence.
These are ultimately fairly simple preparation steps, even if they take a little bit of time to execute. And particularly for beginning investors, or those uncertain about the current state of the markets, an approach like this can make a significant difference.