Investing

How to start an investment strategy

Useful tips for beginners on how to build an effective investment strategy

How to start an investment strategy

The textbook of modern life teaches us that if we have the chance, we should, by all means – Invest. But one major question stands in the way of many, preventing them from jumping into this new challenge. How and where do I start?

Here are the first steps to consider when building your investment strategy.       

1. What is an investment strategy?

Before we dive into the deep, let’s take a look at exactly what an investment strategy is. Well, simply put, this is the combination of knowledge, skills, and different tactics that investors apply in order to minimize money loss and build their profits. 

2. Your goals and 💸

Your number one task, without a doubt, is determining your goal. Have realistic goals about what you can earn from investing. Your second task is coming up with a budget that you are comfortable dedicating to investing. If you have trouble deciding what your budget range should be, then think of it this way – it is the sum of money you are willing to lose in the learning process. Our advice is to focus on learning how the market works and how to build an effective risk management strategy (will explain later on), rather than fixating on the future profits.

3. Choosing what to invest in

In the beginning, you will feel overwhelmed with all the different opportunities laid in front of you. We advise you to carefully research each market niche and see which one will be suitable for you.

Here is a shortlist of some of the largest markets an investor can participate in:  

4. It’s a risky business

Trading is a risky business for the experienced, let alone for the newbies. Moreover, as someone who is just starting, you will have to be prepared for the possibility of losing your money because there is a high chance that this might happen. However, there are a few things you can do to increase your chances of winning.

Let’s take a closer look at two of the most famous online trading risk management orders:

  •  Stop Loss – the Stop Loss order gives you the opportunity to automatically buy or sell when the asset reaches a specific price point (previously determined by you) when your position is negative. This tool stops your loss from becoming even larger. 
  • Take Profit – the opposite to Stop Loss, this order gives you the opportunity to automatically close a position in profit when the market reaches a specific price, ensuring you not to miss out. 

Bear in mind that with property and business investing, the risk of losing money is much higher because there are no automatic risk management strategies that can be applied to minimize your losses.  

5. Time to leave the party

The “Exit Strategy” – we have said it many times, and we will say it again – knowledge is power. When you trade with a broker, you need to fully understand what it will cost you to “leave the party” or, in other words, to “cash-out”. Learn as much as you can about commissions, spreads, taxes, fees, and everything that can eat away your profit each time you want to withdraw your money. 

Trade Responsibly: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.08% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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