Once you’ve gotten a hold of managing your finances effectively, it is time to start investing. As a novice investor, you will probably have a lot of questions like, “how do I start investing?” ”where can I invest?” and “how much can I start with?” This article will give you insights on how to start your investment journey.
1.) SET A REALISTIC GOAL
When investing, you should have a goal and strategy in mind. You’ll need to be aware of the result you are trying to achieve to make the right investment decisions.
For example, by setting a realistic target of investing at least ₦100,000 per year and to grow your wealth by 15% each year, you have made your investment journey purposeful. Also, breaking down your investment goal into a step-by-step action plan will make it easier and faster to achieve.
2.) UNDERSTAND YOUR INVESTMENT OPTIONS
There are multiple investment options available to investors depending on their risk appetite, starting capital, and time horizon. It is important to understand the investment instruments available and their level of risk. The most popular instruments for those just starting include:
- STOCKS: Stocks are shares of ownership in a company held by a group or an individual. They are also known as equities. Stock investors earn money from capital appreciation, cash dividend, and bonus issues.
- BONDS: These are loans given to a company or government that essentially pays investors a fixed rate of return for a certain number of years. Bonds are less risky than stocks because you’d know when and how much you will earn.
- MUTUAL FUNDS: Another way to invest in Nigeria with a small amount of money is via mutual funds. A mutual fund is an investment vehicle where investors pool in money to invest in various securities.
3.) DO YOUR RESEARCH BEFORE INVESTING
Before investing, you should have done thorough research to have some knowledge of what you’re investing in. Know where your money is going and what you’ll get in return. Familiarise yourself with the instruments, the asset manager and the investment firm you plan to invest in/with.
It’s important you do your due diligence before making any investment decisions. Ensure you understand what you’re investing in and be aware of hidden costs, fees and penalties that come with each investment.
See Also: Three Stages of the Investor Life Cycle
4.) START INVESTING AS EARLY AS POSSIBLE
One of the best ways to see substantial growth in your investment is by starting early.
To achieve this, make room in your budget for investing. Start by investing at least 10% of your monthly income and simplify the process with digital investment platforms in Nigeria.
Compounding interest meaning everyday your interest is calculated based on your principal and previously accrued interest. Your daily returns earns you more returns. This is beneficial to you because the earlier you start investing, the more time your money will have to grow exponentially.
