Traditional investments tend to arouse the ire of many novice investors. For one thing, they are complicated, and there are often many hidden fees and commissions involved. Newcomers to the scene tend to feel a little intimidated by the financial gobbledygook that accompanies these types of investments. Financial investments cover 4 broad categories of assets: stocks, commodities, indices, and currency pairs. Within each of those classes are hundreds of viable propositions. The trick when it comes to building a viable financial portfolio is knowing where your bread is buttered. In other words, start with what you know, and branch outwards.
1. Shop around for the best trading and investment platform
Granted, there are a myriad of options available to you when it comes to investing your money. Which one is ideally suited to your needs? This is a question that is best answered with a little introspection. As a novice trader, you may be well served with a trading platform offering full mobile functionality for on the go trading, a demo trading account, low minimum deposits, and low minimum trade amounts. There are many possibilities available to you in this realm. It is imperative that traders stick with fully licensed and regulated brokers, since these provide you with recourse in the event of a complaint.
2. Start with what you understand
If you’re just starting out, it’s probably a good idea to start investing with assets that you understand. These include your choice of currency, commodity, index, or stock. You may prefer the USD, GBP, or the EUR. Perhaps you understand the Dow Jones, the NASDAQ, or the S&P 500? Whatever your focus, stick with it to begin with. This will give you the confidence you need to start investing elsewhere. The general rule when investing in an asset class is never to exceed 5% of your available capital on any one investment. If you’re starting out with $1000, allocate no more than $50 to each trade. That way if the trade sours, you still have $950 to invest elsewhere. This is part of a risk diversification strategy. Once you’re up and running, you will invariably learn more about things like stop losses and take profit. These measures are geared towards maximizing revenues and minimizing losses.
3. Consider contrarian investment opportunities
Many financial portfolios are made up of stock options. In fact, the vast majority of 401(k)s are a mix of domestic and international stocks. Within that basket of investments are mutual funds, ETFs and individual stock holdings. However, there are different types of investments that are available to clients. These include things like contracts for difference. CFDs are unique in that the trader does not take physical possession/ownership of a stock, currency pair, commodity or index. The trader simply speculates on the future price movement of the underlying asset. By anticipating binary options asset price (in the money or out of the money) movements, traders can profit accordingly. Unlike conventional stocks, an appreciation of the asset does not need to take place. Provided the trader calls it right, money can be made.
4. A solid foundation in trading education
The value of a trading education is evident in the outcomes of your trades. If you are trying to boost the value of your financial portfolio, it’s important that you understand precisely how macroeconomic variables operate. A sound knowledge of economic data releases (GDP, NFP, CPI, inflation, Fed meetings etc.) goes a long way towards picking winners in the market. For example, a Fed rate hike is considered good news for the USD, and bad news for emerging market currencies. Macroeconomic data releases also influence commodities. When the Fed FOMC decides to raise interest rates, dollar-denominated commodities like silver, gold and crude oil will be influenced. Typically, the relationship is negative.
And there you have it, a quick guide to making your dollars go further in the markets!