Investing 101: A Beginner’s Guide To Investing

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If you want to achieve financial independence, learning investing 101 is crucial so you can meet your goals and improve your financial well-being.

RELATED: 11 Secrets of Self-Made Millionaires You Must Know

In this article:

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  1. Three Words: “I Don’t Know”
  2. How to Start Investing Money in the Stock Market
  3. Should You Put All Your Money In Stocks?
  4. Should You Day Trade?
  5. Should You Invest in Your Friend’s Business Idea?
  6. Is Investing in Cryptocurrency a Good Idea?
  7. What About Mutual Funds?
  8. Is Real Estate a Good Investment?
  9. What About Precious Metals?
  10. What Should I Do to the Rest of my Money?
  11. Invest in Yourself
  12. Create Multiple Streams of Income
  13. Stay Healthy and Exercise Gratitude

Investing 101: How to Invest and Secure Your Future

Three Words: “I Don’t Know”

The three most important words in investing 101 are “I don’t know. ” Anyone who doesn’t tell you this is lying through their teeth.

We live in one of the hardest times ever to invest. People lose jobs, go broke, and a culture of fear rules the news cycle.

People are scared and uncertain, which holds them back. Investing still has a level of uncertainty to it, but the right ones can give you the cushion you need to move forward.

How to Start Investing Money in the Stock Market

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There are three types of people who make money.

  1. People who hold stocks for as long as they live.
  2. Those who hold on to stocks so quickly.
  3. People who cheat and scam others along the way.

Remember the three words mentioned above. If anyone who’s offering you an investment deal isn’t saying “I don’t know,” consider that a red flag and move on to the next person.

The best way to invest money in the market is to pick some stocks and hold on to them for as long as you can. A good rule of thumb is, if you think a company will still be around 20 years from now, it’s probably a good investment.

Other criteria you can consider include:

  • Whether or not the management has demonstrated honesty and integrity
  • If company stock has crashed for one reason or another (which leads to lower prices)
  • The brand name’s strength
  • Demographics

Here are some good companies you can start investing in:

  • Special facilities for retirees
  • The Internet
  • Temporary staffing agencies
  • Energy sources, especially if the energy source doesn’t depend on government subsidy
  • Batteries

Municipal bonds are another good option, especially if you’re more on the conservative side of the spectrum. These are loans investors make to a local government.

Should You Put All Your Money In Stocks?

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Don’t put all your money in stocks because you don’t know what’s going to happen next. Allocate no more than 3% of your portfolio in single individual stocks, and not more than 30% of your entire portfolio in the stock market.

Practicing diversification lowers your investment’s risk level. Pick 20 companies you think will succeed in the long term and invest whatever you can in them.

Once you’ve done that, you should also try to ignore any talk about tech bubbles, housing bubbles, and other bubbles you can think of. Most especially, avoid getting investment advice from news articles.

Should You Day Trade?

Day Trading Definition: Buying and selling stocks in a very short timeframe (usually 1 day). Its goal is to earn profit each day add those profits up each time.

You can, but only if you’re willing to work 24/7, 365 days, and lose a lot of money, at least at first. Losing money at a day trade isn’t like losing money at a regular job.

If you work at a regular job, as long as you show up, you get paid. Whereas, if you day trade on a bad day, you could end up losing money you would never get back.

This brutal process can be enough to mentally and emotionally destroy a person.

Should You Invest in Your Friend’s Business Idea?

As many as 8 out of 10 businesses fail in the first year. Don’t put your eggs in one basket, unless it meets all of the following criteria:

  • The CEO has successfully started (and even sold) a business before.
  • The business targets a strong demographic.
  • The company is making money.
  • You know you’re getting a good deal (look at similar companies and their value).

RELATED: How to Identify and Capture Market Trends for Your Business

Is Investing in Cryptocurrency a Good Idea?

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Bitcoin and other types of cryptocurrency have a 1% chance of surviving. You can put a bit of money on cryptocurrency, but don’t make it a huge chunk of your portfolio as it’s a very volatile market.

If you do invest in cryptocurrency, make sure you secure your wallets properly. Once they’re gone, they’re gone forever.

What About Mutual Funds?

Mutual Funds Definition: Exchange-traded funds that use money pooled from many investors to purchase securities.

Avoid mutual funds when you can. Bank representatives who push for these types of funds have a long history of lying about fund performance, hidden fees, and even commission rates for the agents.

Contrary to what these representatives claim, mutual funds perform on par with the general market so cut the middleman, save yourself the fees, and put the money in stocks instead.

Is Real Estate a Good Investment?

Real estate has the hallmarks of a bad investment, including:

  • Extra fees and tax overhead
  • High maintenance costs
  • Too large a share in someone’s personal portfolio
  • Involves massive amounts of debt

You can go for it if you avoid all three and can live with the opportunity costs associated with real estate. Otherwise, just rent a place and use the money for investments that require less upkeep.

What About Precious Metals?

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If you absolutely must invest in metals, silver would probably be the better option. Unlike gold, which is just a precious metal, silver is also an industrial metal, and always had some degree of intrinsic value.

Prices of precious metals don’t correlate with inflation, so investing a big percentage of your portfolio on metals isn’t ideal either.

What Should I Do to the Rest of my Money?

Keep them as cash.

Cash is still probably the most valuable thing to have in your day-to-day life. It’s what you use to pay your living expenses and other extras that can crop up.

The rule of thumb is, pay any debts you have (like student loans), add to your emergency fund and living expenses, then invest. If you have cash in the bank, it’s much easier to relax and live your life.

Invest in Yourself

Don’t forget to start investing in yourself too. Some ways you can do so include:

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  • Starting your own business. Find a niche, start writing about it, then upsell your services.
  • Investing in experiences (like travel) than material goods.
  • Buying more books, which have one of the biggest returns on investment for the sheer knowledge and joy you can get from them.

Create Multiple Streams of Income

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Instead of just trying to save money from your paycheck, try to create other streams of income. Once you do, saving just comes naturally.

A paycheck won’t make you money, especially after taxes, other expenses, and the emotional impact of the daily grind.

Stay Healthy and Exercise Gratitude

Take care of yourself and surround yourself with people who lift you up. Be grateful for the little things in life.

Finally, write down ideas no matter how good and bad they are.

We hope this investing 101 guide helped you get started on the way to better financial well-being. While having lots of money is great, however, the wealth deep inside you is the most vital kind of wealth you need to have.

What lessons in investing 101 you wished you have learned? Let us know in the comments below.

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