There is a common misconception that you have to have a lot of time and money to be an investor. But, the truth is that anyone can invest, and do it successfully. They just need to follow a few simple steps.
Step 1: Be Disciplined
Years ago, the Wall Street inner circle held all the power, but that world has changed. Investing is no longer limited to the global elite. Now any Tom, Dick, or Harry can open a brokerage account for as little as $500 (or even less with some firms) and grab a stake in a company they’re interested in. Instead of getting fries with that, why not put those hard-earned dollars to work for you in the market? Everyone has to start somewhere, and you’d be surprised how quickly those greenbacks can add up. The fact is that nobody ever got rich working for someone else. Wealth is built from ownership, and ownership is built from discipline, dedication, and sacrifice.
Sure, affluent investors may have a significant advantage in a few aspects. Having money reduces the personal financial risk. For example, a loss of $500 would not mean as much to a multi-millionaire as it would to someone on minimum wage. Similarly, it is quicker to make a lot of money if you have the cash to spend (e.g. a 10% return on $1,000 is only $100 but that same 10% from a $100,000 investment yields $10,000). However, successful investing is not about how much money you supply. It is about making the most of the money you have.
Step 2: Create a strategy
Once you have the money to get started, you don’t want to run around like a chicken with it’s head cut off. That’s why it’s important to create a strategy. What are your goals? What level of risk are you willing to take? How often do you want to trade? What investing style are you most comfortable with? These may seem like tedious questions, but they can really help set the stage for you. Once you know where you want to be, building the road to get there is a whole lot easier. With a clear strategy, you’re able to narrow your options markedly, which means less time and effort filtering through the seemingly endless investment options.
Step 3: Do your homework
While there are many set it and forget it options out there in the form of index funds and ETF or managed portfolios, the most successful investors are the ones who do their homework, spending time researching each potential company and the marketplace they exist in. They meet with managers and/or employees in that industry to understand where the market is going to be in the next five years and how they will get there. They look at how competitors fare in the market and how they are reaching customers. They analyze trends to see how other similar companies have achieved success in the past.
In all of these instances, the size of an investment is irrelevant. It is where the investment is made that really counts. A wise $100 investment in a small company that later becomes profitable will, of course, be far more beneficial than a misguided $10,000 investment in one that later struggles.
In this sense, investment is not unlike starting a new business. Someone with a lot of money can start a company with great ease. However, if they do not have a product the market needs, do not do their research to understand the marketplace, and do not have the skills to manage it, the company will quickly become a failure. Meanwhile, someone with very little money could be incredibly successful by finding an innovative product and learning the best ways to get it to their desired customer base (speaking to other business leaders, for instance, or contacting the Companies House number for advice).
Step 4: Keep it up
Lastly, it is important to be consistent, learn from your mistakes, and stay on top of things. You don’t have to spend a lot of time on it, but reading business news daily and checking in on your portfolio a few times a month can ensure you keep your head above water. Once you get the hang of it and start finding your niche, then it’s all about rinse and repeat.
So what are you waiting for?
Do you think you’re ready to become an investor? Take the first step at SprinkleBit.com, where you can learn to invest on your terms. Whether you want to take courses in SprinkleBit University, check out what other investors are buying and selling in the community, practice trading risk-free on the virtual stock market simulator, or dive right in with SprinkleBit Brokerage, SprinkleBit can help you navigate the markets like you’ve been doing it for years.