How To Invest Without Knowledge In Stock Market?: 7 Tips For Being A Pro Investor

When others are saving their money and putting it into investing but you don’t, how does it feel?

Annoying!

But what about when you do save enough money and want to invest it too, but are unable to do so due to a lack of the right Information?

How do you feel then? Frustrating? Helpless? Confused?

In many cases, most people don’t even think of saving and investing their hard-earned money. Simply lack of awareness.

Even though you can just save a little, you must invest it. This is compulsory to support your family including yourself financially for the future.

If you have no idea where and how to start from.

Get along with this post in just a few minutes, you will know and learn how to start your first investment as a beginner with no prior knowledge.

In simple 7 steps.!

Following these 7 steps, you will not only know How to invest with no knowledge but also Where to invest money for different purposes.

Let’s jump in.

What Are Your Investment Goals?

Can you win or even play a match on a soccer ground when you don’t see any goalposts? The same happens with investment.

You need to identify your goal.

Decide for what purposes you want to invest your money. Is it for your long-term investment?

Do you want to generate income with your investment soon? Or are you just looking for a comfortable retirement and want to invest in this?

Decide your goal first. Your investing can be for your own house in 5-10 years or to pay a fee for your child’s admission to a university.

Once you decide on your investing goal, it will help you know better investment options availability.

Moreover, you can determine the risk you can afford, the expected profit you can get and the investing account that suits you most.

Thus it makes your investing even easier and better.

Pay Attention

Suppose you are planning for retirement, it wouldn’t be wise if you go for a brokerage account and invest in your portfolio (shares/mutual funds) to gain returns over the years.

In this case, you must go for an Individual Retirement account, IRA or 401(k). In the Indian context, you should opt for the Public Provident Fund, PPF or National Pension Scheme, NPS or other retirement plans offered by Insurance companies.

People often make such mistakes when they are new to investments. Where Do I Start To Learn Investing? will help you in learning investing from scratch.

Select The Right Investment Vehicle

‘This is So Important’. You have decided your investing goals but what if the investing vehicle you opt for goes wrong?

Choosing the right investment vehicle can play a vital role in your success or failure when investing.

Some factors other than your investment goals determine the right investment vehicle for you.

Your risk tolerance, time horizon, financial situation and investing experience (if any).

Different investing vehicle comes with their different set of advantages and drawbacks.

Some provide stable returns over the long term with low risk as security bonds, while others are highly volatile and risky but designed to give high returns over time as shares.

Two other popular investing vehicles are ETFs and Mutual funds. Both hold stock, bonds and even commodities but still, their nature is way different.

Mutual funds are actively managed means handled by experts and Asset management companies on behalf of their holders.

While ETFs are managed passively and can be purchased or sold like shares at any time.

Real estate and Crypto-currency are also famous as other investing vehicles.

You can have more than one investing vehicles, that again depends on your risk tolerance, time horizon, your financial situation and your investing experience.

Calculate How Much You Can Invest

Once you have chosen your investing vehicle, your next important step is to decide how much you want to invest.

Knowing the amount you plan to invest is a crucial stage in the journey of ‘How To Invest With No Knowledge?’

Two factors determine this stage, first, your investing goals outlined earlier and second, the time you expect to reach your investing goal which is called time horizon.

Prioritize your amount according to your investing goal and the time horizon to get your rewards the way you expected.

Monthly Investing or Lump Sum Which is Better?

The answer is simple, which suits your pocket most is better. Those who have enough cash prefer to invest a lumpsum amount.

In most cases, not everyone has enough cash so they better choose the SIP/DCA option to keep investing over time.

Beginners must always choose this option of investing to lower the risk.

Though for mid-term to long-term investment goals DCA/SIP is supposed to be a better, more valuable and safer strategy to ensure you regularly invest to your goals.

It also gives you the benefit of regularly trading in bullish and bearish markets as the nature of the market fluctuates.

On the other hand, if you are looking for short-term investing a Lump sum amount to be invested is the most suitable decision.

Generally experienced and old investors opt for this option if they have a windfall amount of money. Why? Let’s understand it.

If the market is consistently growing, a one-time investment gives you higher returns as it has a longer period to grow from the beginning.

Measure Your Risk on Investment

This is the stage completely ignored by new investors in most cases.

Reason? New investors often put their money on something which is backed by a ‘Tip’.

This tip or what you may call a recommendation by ‘experts’ tends to every new investor to ignore the risk associated with their investment.

Simply because they find an easy answer to their question ‘Where do I start if I know nothing about investing?’ without putting in self-efforts.

This is Dangerous! Know your Risk first before Investing.

Figure out Your Risk Tolerance 

It’s good to know the level of risk and Risk capacity before investing but it will be better if you do measure your risk tolerance with the investments you make.

Risk tolerance can be described as the level of risk an investor wants to take willingly for the sake of higher returns he/she expects.

Risk tolerance is supposed to be an estimate of how much and how you will react emotionally to losses you face or experience the volatility of the investment.

Those who have conservative risk tolerance prefer to play comparetively safe and invest in Securities bonds and Mutual funds rather than stocks.

While, those who have more aggresive risk tolerance often prefer to opt higher portion of their portfolio in Stocks.

How to Identify the Risks in Investing?

To identify the best option among various investing products, you have to go through identifying the risks associated with those investing options.

And how can we do that?

By conducting a comprehensive comparison of the different schemes and investing options. In this task, you can ask for help from others who are experienced in investing around you.

This will help you to figure out what level of risk each investing option holds. After analyzing it you will have a clear vision to invest your money accordingly.

On the other hand, to measure your risk tolerance you can simply take the help of the Risk Tolerance Questionnaire.

These Risk Tolerance Questionnaires are generally a set of multiple-choice questions designed on investment nature, amount of money, income, liabilities, time horizon, risk level etc.

Open Your Brokerage Account

All the learnings and teachings are useless unless they are applied practically.

It means, that all knowledge you gained in the previous 4 steps will be meaningless if you don’t start investing in real life with real money.

To implement this you will need a brokerage account. 

A Brokerage account is used to buy Bonds, Stocks, shares of Mutual funds/Index Funds, ETFs, Gold ETFs and other Securities to invest.

Popular Brokerage Firms in the USA by AUM

Through awareness and knowledge, you can master your emotions without being influenced by market trends.

Monitor and Rebalance Your Portfolio

Market volatility is the one major reason investors tend to rebalance their portfolios. Higher and more frequent volatility causes investors to rebalance their portfolios sooner.

Many investors overreact to media reports, some experts’ suggestions and rumours during changes in the market environment.

You must be patient and focused the same as Mr Bean when the market seems rollercoaster ride.

I suggest be very careful these times and better consult your advisor for required help.

FAQs

1. Only invest money you can afford to lose
2. Think long-term investment
3. Understand what you are investing in,
4. Set your investment expectation
5. Diversification is key
6. Add to your Investment over time.

Which Type of Investment is Best?

• Money market funds
• Mutual funds/Index Funds
• Exchange-traded funds (ETFs)
• Stocks
• Real estate
• Bonds
• PPF (Public Provident Fund)/(NPS) National Pension System
• ULIPs (Unit Linked Insurance Plans)
• Retirement Plans/Scheme for Senior Citizens’ Savings.

Final Words

Investing is a process that happens over time and not overnight.

Investing your money is no joke. It’s a responsibility. You just can’t put your money into something you don’t know. Can you?

Following herd mentality, believing in every media news, and regularly checking your returns won’t help you.

Be patient, play safe in the beginning, and be consistent in learning about investing.

Calculate your risks and expected returns. Investment is the only key to protecting your money against inflation and making you financially independent.

Lots of people, inferior in knowledge and skills to us are doing great financially, because of consistent efforts and by keep improving themselves.

Have courage, be consistent and believe in yourself.

The world is yours.

Note-:
The content is exclusively for educational purposes.
Investments in the securities market are subject to market risks. You must consult your advisor/expert before making financial decisions.
Kindly read all the related documents carefully before investing.