Introduction to Investing
How to succeed
Before you choose from a wide variety of investment opportunities and products, think about your priorities, needs, and risk associated with various types of investment. We present eight universal tips (not only) for beginners which should help you succeed on the market.
- Set Clear Targets
Before making your first investment, answer these three questions:
- Do you want just to protect your savings from inflation, or do you expect a higher return on your investment?
- Are you sufficiently informed about the opportunities and risks the market contains?
- Are you willing to devote yourself systematically to investing, or will you pursue it only randomly?
- Set An Investment Horizon
Always bear in mind in what time frame you will need the money.
- The longer your investment horizon is, the wider the spectrum of investment opportunities becomes.
- Never assess an investment opportunity just according to historical performance. Past gains are no guarantee of future ones.
- Consider Your Attitude towards Risk
Every investment is associated with a certain degree of risk.
- Safer investments tend to bring lower yields. On the other hand, do not expect that riskier investments will always turn out to be profitable.
- It is always better to have two irons in the fire. Never invest the whole capital in a single product.
- Choose A Reliable Partner
Picking a good broker is as important as choosing the stocks in which you are going to invest.
- Entrust your money only to a broker with necessary certification (licence from the Czech National Bank).
- Be sceptical to all investment recommendations in which the profit is almost guaranteed.
- Always consider whether the entire amount of fees charged by a broker is reasonable compared to the potential gain from an investment.
- Keep A Cool Head
- Don't let emotions influence your decisions.
- If you consider an investment often cited in the media or recommended by analysts, you will most probably be one of the latecomers.
- Don't panic in a general downturn on the market.
- Think about Every Trade
Never make rash decisions.
- Place an order only after you have had enough reasons supporting it.
- Each and every position should be opened as if this was the one that would make you a millionaire.
- Don't invest in something you don't understand.
- Maximize Gains, Minimize Losses
- Make a regular assessment of your investments in relation to market opportunities.
- Hold, or increase your position in instruments which are profitable.
- Follow to the motto "trend is my friend“, but, at the same time, have an idea about an expected gain. Take the profit when the trend turns.
- Losses are a necessary part of investing. Always set a pain threshold.
- Don't increase a losing position by averaging down, don't fight the trend.
- Enhance Your Investment Skills
- Educate yourself; do not invest without a plan.
- Be well informed. Read financial publications, daily news, web portals.
- Set a strategy, be disciplined, use your common sense, and, most of all, be patient.