Thinking about your net worth lately? It’s probably a thought that passes through the minds of discerning gents on a weekly or monthly basis. However, do we really know how to answer that question? Arming yourself with knowledge will help you navigate the potential pitfalls that lie in wait – but should you sidestep those risks, the rewards are there to plunder.
Recent research conducted by investment app Dabbl, revealed that nearly three quarters (72%) of UK Millennials say they haven’t built any kind of investment portfolio due to it being “too complicated” a process.
However – the possibility of generating extra income through investing in shares is not beyond our reach, not something that only the particularly wealthy are able to achieve, and not something that needs to be complicated.
It is worth remembering when starting out on your investment journey – that you are in control. So one approach to building a portfolio is to focus on goods and services you already know, trust and believe in. By backing a company you already have an affinity with, you are banking on the success of a company you have good reason to believe will succeed.
Another good idea for beginners is to start small, and gradually increase. There really is no harm at all in proceeding with caution, and ensuring you only invest amounts you can afford to. What is important at this stage is finding a platform that isn’t going to over charge you for trading. At Dabbl – members get three commission-free trades per month.
Portfolio theory is both an art and a science – and the subject of a 25,000-word thesis on its own – but an important point that can have a real impact on the value of your portfolio, is ensuring variety in the shares you are acquiring. If something should occur in a set industry that could have a negative effect on the share price of a range of companies in that industry – you need to ensure that you are holding on to shares outside of this industry – put simply, don’t hold all your eggs in one basket! Instead, limit the risk you are taking by owning shares in a diverse range of companies.
Another idea is to make use of your own personal network before parting with investment. Ask around and see what other people think of a brand or company you are thinking of buying shares in. If it’s a brand you love that’s great, but make sure the appeal is broad enough that you can trust the company will grow and succeed.
Lastly, be wise with your use of dividends. As an investor, you may be rewarded with a share of the company’s annual revenue. Instead of spending it as you would any other additional income – consider re-investing it into the company that paid it to you. This will increase your annual return and benefit you better in the long run.
Investing in the stock market isn’t a sure fire way to getting rich quick, but history has shown us that by investing little and often, the long term prognosis is typically one to cheer.