Personal wealth management awareness is an important prerequisite for achieving financial freedom and wealth appreciation . For novices who are new to the investment field, if they want to gain a foothold in the investment field, they need to make comprehensive and detailed preparations, which is an important prerequisite for subsequent investment activities.
This article will answer key questions in detail, such as "How to start investing", "What are the investment methods", "How can beginners make money by investing", and "Where can I invest to get a good return", providing you with an easy-to-understand investment guide.
Preparations before investing
Before choosing an investment, you must be clear about your financial situation and investment goals . Preparing emergency funds and properly handling high-interest debts are also key steps.
1. Clarify your financial situation and goals
Investors need to comprehensively review their personal financial situation and prepare a detailed income and expenditure budget. They need to accurately calculate the disposable funds after deducting the necessary living expenses, debt repayments and other fixed expenses each month to determine the upper limit of investment funds.
At the same time, set clear investment goals based on the stage of life you are in. Short-term goals may be to buy a car or prepare travel funds within 1-3 years; long-term goals may be to accumulate wealth for retirement, and the investment period is usually more than 10 years.
2. Build an emergency fund reserve
The investment market is volatile and full of uncertainty. Given this , it is crucial to set aside emergency funds. As a general rule of thumb, half of investors are likely to have 3-6 months of living expenses in reserve as emergency funds, which can be placed in a current account or a highly liquid money fund.
Emergency funds act as a financial safety net for investors, ensuring that when faced with emergencies (such as unemployment or serious illness), they are not forced to sell investment assets at a low price due to a shortage of funds, thereby avoiding unnecessary investment losses.
3. Pay off high-interest debt first
Before embarking on an investment journey, investors also need to pay attention to their own debt situation. If they invest while carrying high-interest debt, even if the investment returns seem considerable, after deducting the high interest, they may still be in a loss.
Analysis of investment methods
There are various investment methods in the market, among which active investment and passive investment are the two most common and representative methods. They have significant differences in investment philosophy, operating methods, and return-risk characteristics.
1. Active investment
Active investing requires investors to devote a lot of time and energy to in-depth research on the macroeconomic situation, industry development trends, and company fundamentals. Investors need to be proficient in using various financial analysis tools to interpret company financial statements and accurately evaluate the company's profitability, solvency and growth potential. At the same time, it is necessary to track market dynamics in real time, carefully construct and flexibly adjust investment portfolios based on analysis results.
requires investors’ professional knowledge, experience and market sensitivity . Investors need to continue to learn and pay attention to market changes.
2. Passive investing
Passive investment is typically represented by index funds. The core strategy is to closely track a specific market index and strive to replicate the performance of the index. Investors only need to be patient and hold for a long time to share the benefits brought by the overall market growth. This investment method has the advantages of low management costs and high portfolio diversification, which can effectively reduce non-systematic risks. It is suitable for investors who pursue stable returns and are relatively lacking in professional investment knowledge and time.
Reasonable allocation of different investment methods
Reasonable allocation of investment methods can help investors find a balance between risk and return and achieve steady growth of assets. When making investment allocations, it is necessary to consider multiple factors, such as personal risk tolerance, investment goals, investment period, and market environment.
1. Allocate based on risk tolerance
Investors with lower risk tolerance tend to allocate a larger proportion of their funds to passive investments, such as index funds and bond funds.
Investors who have a higher risk tolerance and have certain investment knowledge and time are more inclined to appropriately increase the proportion of active investment.
2. Combine investment objectives with term allocation
If the investment goal is short-term, the investment should focus more on liquidity and stability. Most of the funds may be invested in products with high liquidity and low risk, and the rest will try some stable active investments.
If the investment goal is long-term, investors need to bear certain market fluctuations due to the long investment period. In this case, a larger proportion of funds can be invested in stock assets to fully enjoy the dividends brought by economic growth. The remaining funds can be invested in fixed income products to balance the risks of the investment portfolio.
3. Allocation based on market environment
When the market is on an upward trend and relatively stable, investors tend to appropriately increase the proportion of investment in stock assets, whether it is actively investing in individual stocks or passively investing in index funds.
When the market is in a downward trend or is volatile, investors may be more inclined to reduce the proportion of stock assets and increase the allocation of defensive assets such as bonds and money funds.
Risk Control in Investment
The investment market is full of uncertainties and risks. Effective risk control can help investors protect their assets and avoid major losses in market fluctuations.
1. Diversify your investments
Don't put all your eggs in one basket. By diversifying your investments, you can reduce the impact of fluctuations in a single asset or industry on your overall portfolio.
Investors should diversify their funds into different asset classes, industries and regions. For example, in terms of asset classes, they can allocate stocks, bonds, funds, cash, etc. at the same time; in terms of industries, they can avoid investing in a single industry and can cover multiple industries such as finance, consumption, technology, and medical care; in terms of regions, in addition to investing in the domestic market, they can also appropriately allocate some overseas assets.
2. Set stop loss and take profit
Stop loss means that when the loss of an investment reaches a certain percentage, the asset is sold in time to limit the further expansion of the loss. For example, investors set a stop loss to sell when the stock price drops to a certain price to avoid further losses caused by the continuous decline of the stock price.
Stop profit means locking in profits in time after the investment has achieved a certain return. For example, when the profit of stock investment reaches a certain price , investors can choose to sell some or all of the stocks to pocket the profits and avoid profit taking due to market reversal.
3. Continuous learning and tracking
The investment market is constantly changing. Investors need to continue to learn investment knowledge and understand the changes in the macroeconomic situation, industry dynamics and company fundamentals. They can improve their investment capabilities by reading financial news, research reports, and participating in investment training courses. At the same time, they should regularly track the performance of their investment portfolios and adjust their investment strategies in a timely manner according to market changes and their own circumstances.
Choice of investment location
The choice of investment venue is directly related to the convenience, cost and benefits of investment. Different investment products are suitable for trading in different venues. Understanding the characteristics and differences of these investment venues can help investors better conduct investment operations.
1. Stock investment
Stock investment is mainly carried out through stock exchanges. Investors need to open a securities account at a legal and compliant securities company, and then they can buy and sell listed stocks on the securities trading platform. Different securities companies have differences in transaction commissions, service quality, research reports, etc. Investors should consider comprehensively and choose a securities company that suits them.
2. Fund investment
There are various channels for fund investment, including official websites of fund companies, banks, securities companies and third-party fund sales platforms. Investors can choose appropriate investment channels according to their own needs and preferences.
3. Bond investment
There are many places to invest in bonds. Treasury bonds can be purchased at bank counters and stock exchanges. Other bonds such as corporate bonds are mainly traded on stock exchanges. Investors need to have a certain level of risk identification and tolerance, and should fully understand the credit status and debt repayment ability of the bond issuer before investing.
Conclusion
Investment is a long-term activity that requires patience and knowledge accumulation, and requires investors to constantly learn, practice, and adjust strategies. While novice investors master investment profit strategies and methods, they must always be vigilant and avoid various risks and choose investment products and investment venues that suit them. Through scientific and reasonable investment planning, novice investors are expected to move forward steadily on the road of investment, let your money work for you, and achieve steady appreciation of assets.