Making investments is pivotal in the journey to financial freedom. Whenever you hear discussions about financial freedom, making investments is a core component. Robert Kiyosaki says that “The key to financial freedom and great wealth is a person’s ability or skill to convert earned income into passive income and or portfolio income”. That takes making some investments. There are different types of investments, of course. That is a separate discussion altogether. Our focus today is investment tips for beginners.
Start Lean And Scale Later
Making investments requires meticulous planning and understanding. That is why you should not just dive in with a skeletal understanding. If you are careless, you can lose money, which will set you back. As a beginner, you need to start small. Starting lean makes it easy to learn and grasp the tenets of making investments. Plus, there will be a limited level of risk since the starting amounts will be small. When making investments, there will always be temptations to go all in. Even when the returns look alluring, exercise restraint. Your early days’ major focus is learning and assimilating the principles. Do not be in a rush!
“Our stay-put behaviour reflects our view that the stock market serves as a relocation centre at which money is moved from the active to the patient.”
– Warren Buffett
It is advisable to find a mentor, preferably someone seasoned in making investments. Having someone like that to handhold you in the early days is wise. A well-meaning mentor will emphasise starting lean. Scaling should be done later, and it should be evidence-based. Essentially the returns from earlier investments should feed into subsequent investments. Starting lean is also good in that it means anyone can start investing. Something as seemingly insignificant as a dollar is enough to be invested. There is also that compounding effect in the field of investing. This means what starts off seeming small grows over time.
People Matter Most
In making investments, building social capital is immensely important. Examples of people-oriented things you will most likely have to do are outsourcing, networking, partnerships, etc. You need to work with the right people in your investment efforts. In everything you do when investing, there are people involved. That is why soft skills are paramount. Soft skill is a personal skill that is usually interpersonal, non-specialized, and often difficult to quantify, e.g. leadership or responsibility. Other soft skills are communication, emotional intelligence, time management, critical thinking, active listening, empathy, and others.
“Your actions reflect your values and, in turn, your vested investment. Be sure to invest your time and actions in the people who will return the results you seek.”
– Tiani Cook
Be Wary Of Trends
You must be careful of so-called trends. For instance, it may seem like something is worth investing in now. Often you hear news about the best industries or stocks to invest in at any given time. Those bubbles may sometimes be worth it, but it is not always so. You need to be very careful. Not every trend or wave is worth riding on. Sometimes it may be best to do the opposite of what others are doing. It reminds me of one of Warren Buffet’s quotes,
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
It is a classic encapsulation of the importance of not always following trends. Most important is to have a solid framework or system by which you scrutinize investment opportunities. For instance, Warren Buffet typically considers undervalued companies which have solid metrics. An example of such is a proven track record of paying dividends. Another metric is the consistency of earnings. This is what is called value investing. You see, he does not merely consider the trends. The best thing to do is always to take trends with a grain of salt. Many people have lost out by being blinded by so-called trends.
Let me sign off on this. Something is striking. Robert Kiyosaki once said about making investments for beginners: “I am often asked how to start investing with little or no money. Please hear this, as this is the hardest thing for people to understand: you do NOT invest with money! You invest with your mind! No matter what the field, your biggest asset is your mind. Once you know, you find deals, find your team and use other people’s money. You sell the deal, and your team gets investment money. ” We are again brought back to the importance of having the right mental structures. It is always about your mindset; nurture it rightly!
