These are some suggestions that we believe you should consider before making any investments; they are not a set of guidelines that will ensure enormous returns and a portfolio that beats the market.

Top 10 investment tips for beginners

1. Establish a Plan

After you’ve decided to invest your money, you must plan by considering the following: How much can I invest a maximum of? What loss can I live with? What purpose do I have for investing? How long will it take for my investment to accomplish that? Do I comprehend all of the definitions and jargon used in the investment context?

2. Understand Risk

Understand how much risk you can take and how it would make you feel if you lost everything you had invested. Often, novice investors panic and sell riskier assets when they start to lose value because they believe they can tolerate more loss than they actually can. You can ensure that your investments are reasonable given your potential for loss by carefully balancing the risks and rewards. Remember, there’s risk associated with everything you do, even withholding cash, which can lose value over time due to inflation.

3. Tax Efficient

When it comes to investing, you probably won’t start with much and may not think tax efficiency is a big deal. Recall that investing is a long-term strategy, and you should take future investment value into account. If you invest now for your retirement, you might have accumulated a sizeable pot by the time you reach retirement age. You might have to pay a sizable amount of tax if you haven’t made investments in a tax-efficient environment, such as a retirement account. Make sure you understand this before opening an account.

4. Diversify

A diversified portfolio made up of various investment fund kinds can help stabilize your portfolio throughout an economic cycle as markets rise and fall. Investing only in specific markets, industries, or businesses exposes you to unanticipated problems that may arise in that one area. Investing in a variety of asset classes, geographical areas, and industry sectors can help to minimize possible losses and optimize long-term gains.

5. Don’t chase tips

Expert commentary on stocks or funds that could be the next big thing abounds in the media and on the internet. Though these “tips” occasionally contain insightful information, exercise caution not to follow them blindly and make frequent changes to your portfolio to capitalize on them by selecting appropriate investments to add to it.

6. Invest, don’t guess

Warren Buffet, one of the most important investors in history, once said, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Penny stocks are seductive because they seem to have a high return potential due to “cancer cures” or “prospective oil fields,” but you should consider the company’s long-term future worth. In other words, very small businesses carry more risk because they might be less well-regulated than larger, multinational corporations. You wouldn’t bet on a pony in a horse race, so the notion that increasing your risk will make you richer is false.

7. Invest regularly

Investing little and often is sometimes a better strategy than making larger lump sum payments. Even for seasoned investors, research on investments has shown that regular investing often performs better than trying to time the market with a one-time lump sum investment. Pound Cost Averaging is an additional tactic that can prove beneficial in periods of volatility. Your goal when investing regularly is to even out the highs and lows of the market. If you start investing early and consistently, compounding can work to your advantage.

8. Reinvest

You might think about reinvesting any capital returned from funds or dividends back into your investment portfolio unless you are seeking a specific periodic income from your investment (see Income vs. Growth Investments and Funds explained here). Reinvesting dividends from stocks can significantly boost your long-term returns, as past experiences have demonstrated.

9. Review again

Remember that investing is a lifelong process, so as time goes on, you’ll need to review your investments, timelines, risk tolerance, and personal circumstances. All of these will change. To try and secure your capital, you might want to decrease your exposure to riskier investments as you approach your goal. Examine the risk profile of your portfolio in addition to your personal risk tolerance. The weighting of various top investment funds in your portfolio will fluctuate in response to changes in value, which will impact the overall risk profile of your portfolio. Rebalancing your portfolio regularly aims to bring it back to the desired level.

10. Stick to your plan

When you invest for the first time, you’ll find that it’s difficult to ignore the noise surrounding market fluctuations, commodities, inflation, share recommendations, interest rates, dividends, gold and oil prices, etc. With markets becoming more globalized, it is both limitless and fairly constant. A True investor should constantly have as their primary focus the long-term trends and macroeconomic factors that initially shaped their plan (you can view these in our DIY investor magazine).