You’ve worked hard to save, and the last thing you want to do is to risk losing those hard-earned dollars. But at the same time, wouldn’t it be great to be making more than 2% (or less) on your savings sitting in an account at your bank? The cost of living is increasing while your savings seem to be shrinking. You hear stories about investors in the stock market making huge profits, but it can mean losing some or all of your money if a company falters or fails completely.
First Time Investing Without Too Much Risk
The official advice is never to invest money that you can’t afford to lose. So, without risking a substantial amount is there a way you could try investing on a smaller scale, maybe making a little more on your money through capital growth or dividend income without chancing it all?
Low-risk shares are an excellent option for the cautious or beginner investor. It’s a safety-first path forward, allowing you to dip your toes in the ocean of investments, rather than plunging into the deep end. The idea is to look for investment stocks that have a long, stable history of solid performance. You can customize your approach based on your available funds, time, and even interests.
Investing in stocks for beginners can be time-consuming since you’re going to need to do some research into the companies you’re considering for investment, as well as more general information regarding how to invest in stocks. If you have no experience of investing in stocks, you’re going to want to move more slowly than someone who’s familiar with the process.
To get started, you’ll need to find an investment broker to handle the purchase of stocks for you. There are many online discount investment brokers, making it easy to invest wherever you are, and transactions can take place online or over the phone. You’ll need to factor in the trading costs or other fees the brokerage will add for the service.
When you purchase a stock, you can choose between:
- market, or
- limit orders.
In other words, you can buy the stock at the current market price, or set a price that you would like to buy it at, which will only be actioned if the stock drops below that price. In addition to the base stock price, you’ll want to know the broker’s minimum investment limit. If a stock is $60 for one share and your budget is $100, but the broker’s minimum investment is $200, you’ll want to shop around for another broker that offers terms that fit your needs.
How Much Should You Invest?
How much to invest at first is another decision that has to be made. Some people borrow money at low interest rates, hoping to make more by investing than they’re spending on the debt. Others set aside a percentage of total savings to use. When you’re first starting out, it’s good practice to set aside a nominal amount with which to learn, and then scale up as you grow in confidence and your understanding develops.
Before actually buying investment stocks, you’ll need to learn how to identify low-risk shares. Research the corporation whose shares you’re considering to check its performance record, as well as its prospects. Has the revenue steadily grown over a long period? Is there evidence of stability and good management? Is the product in demand and likely to continue to be desirable?
A volatile share is that of a corporation that might have had dramatic ups and downs in the past, or that predicts sharp growth in the future; such investments can yield great returns or dramatic losses. You want to search for the opposite as you start out in investing. Consider low risk, stable corporations with a strong record and good prospects.
Current examples include:
- Microsoft (MSFT), a well-known corporation that offers leading business software,
- Mastercard (MA), a leading credit card provider, and
- APPLE (APL), maker of luxury technology products.
Low-risk investments aren’t necessarily the least expensive since those corporations have proven records and value that’s associated with their shares. While it might seem as if the least risky thing to do is to buy cheap shares or focus on so-called “penny stocks” and hope they grow, it’s a better investment to buy valuable shares that have a high likelihood of retaining and increasing their value.
Are You Ready to Get Started?
To get started with your first-time investment with the lowest risk possible, set aside a sum that you’re comfortable with using. Do thorough research on stable, growing companies, and find an investment broker that meets your needs. There’s nothing wrong with taking small steps and playing it safe as you learn and access new investment opportunities, and the potential benefits are certainly worth the time taken to build a portfolio.
What’s your favorite stock? Tell me in the comment below!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.