It seems like everyone’s an investor these days. The COVID-19 pandemic saw a huge increase in the number of self-declared investors, with more than a quarter of investors polled having begun their investment journey in 2020 or later.
With the barrier to entry lower than ever before, it’s now super easy for new investors to find out more about their new hobby. Whether it’s by checking out “Investor Tok”, joining a real estate investment club in Austin, or even sticking to old classics like Investing for Dummies, there are many ways for new investors to get the information they need.
However, there are many unscrupulous actors out there who are looking to ensnare vulnerable and naive new investors by giving them false, misleading, or even harmful investment information. So before you set up your cryptocurrency account or sign up with a robo investor, remember these handy tips to make sure that you don’t end up at a loss – literally and financially.
What do you want to achieve?
There is a truly dizzying array of investment tools and products in the market, and it can seem overwhelming to a rookie investor. Before you start thinking about where to put your money, think about what you want it to do for you. If you’re not a risk taker, best to stick with stable investments like government bonds and securities. While these won’t generate the most revenue for you, they’re the least likely to undergo huge shifts in value.
If you don’t mind taking a little risk, look at investments like real estate investment trusts (REITs). While these are more profitable than bonds, they’re still the best performing stocks. Those would be stocks themselves. If you pick the right stock, you could very well become a millionaire in a matter of months! But be warned – one in a thousand companies end up being the “unicorn” that every investor, big or small, is chasing.
If it’s too good to be true, it probably is
The modern investment landscape is littered with “get rich quick” schemes that appeal to those looking to make a quick and easy buck. Fraudulent cryptocurrencies and thinly veiled Multi-Level Marketing (MLM) schemes all purport to give the buyer huge rewards with very little effort. While we all wish these were legitimate, unfortunately almost none of them are. These investments are often just schemes to amass capital and run away with it before anyone notices. Be especially wary of schemes which ask you to pay a large amount of capital upfront – this is often a sign that the people behind this scheme are after your money. Please make sure to educate yourself on investing and investment terms before putting your money in. It’s a good idea to take some online investment classes if you’re unsure that you know enough about investing and finances.
Read the fine print
Yes, we know nobody actually reads the terms and conditions. But they can be an invaluable source of information when it comes to investment deals. Read through the small print and make sure that the people you’re investing with haven’t squirreled away any hidden fees, conditions, or clauses that could lead to you losing money. Even cryptocurrency platforms, which have been gaining in popularity, have many hidden withdrawal, deposit, and transaction fees which eat into your crypto earnings. If possible, get a lawyer or an expert to look through the terms of investment for you to make sure there isn’t anything untoward.
Rely on word of mouth
Word of mouth can be a powerful indicator as to the veracity of an investment tool. Popular investment forums like Reddit and Money Talk can be excellent tools to determine whether or not something is worth investing in. Of course, like everything else you see online, take what is said on these platforms with a pinch of salt. However, it is a good way to get a general sense of an investment, especially if you don’t know anyone in your own life who can advise you on these matters.
Don’t stop saving
It might be tempting to put every bit of your leftover salary into Bitcoin. But remember that investments, while good for you, shouldn’t end up being your only fallback. Markets can crash and stocks can plummet. When this inevitably happens – and it will happen – it’s important to still have some money you can rely on. Keep saving and put this money in a low yield savings account or keep it in bonds. While it isn’t the most glamorous investment, it will provide a solid bedrock for you to attempt other, more daring types of investment. And the more you save, the more you’ll have to play with as you gradually become a more seasoned investor.
Investment can seem exciting because you’re finally becoming your own boss and taking the first steps to true financial independence. However, it is a road filled with many pitfalls and hidden traps. Make sure that your investments are well thought out, researched and planned. With the right advice, information, and tools, investing can become the best financial decision you ever made.