More than half of US adults invest in stocks. It provides an opportunity to potentially receive a financial return from an investment. This number is only set to rise as investing becomes more accessible. For beginners out there, we’re here to help guide you on your journey to investing.
Starting your venture as an investor
Investing is when you buy into something that you believe will increase in value over time with the potential to achieve a good return on investment. A common way to invest is to buy shares in a company. This means that you would own a proportion of the company’s stock.
If the value of the company’s stock rises, so will your investment. Though, it is important to remember that losses can be made too – after all, a company’s value never stays the same. The good thing is, as stock value fluctuates, losses are likely to be made up over time so that you don’t fall short on your investment.
Prep before investment
To invest, you need to have money to invest in the first place. You should make sure you have around three to six months’ worth of living costs set aside in your bank account as an emergency fund, which can be used to dip into when you need. Anything left can be invested. It’s advised to invest for around 5 years to maximize your returns potential, so you don’t want to fall short on money in the meantime.
Once you have money set aside for investing, it’s time to set up an investment account, often referred to as a brokerage account. This will allow you to buy and sell shares. Different accounts come with different benefits so it’s important to look at what their requirements are. Most accounts will charge a fee for using their platform and buying and selling stocks, so finding an account with the lowest fees means less loss of funds.
Monitor the value of the US dollar
Investing means being intelligent with money. This means monitoring the value of the currency. If the value of the US dollar declines over time, your return on investment will decline too, which is what you don’t want to happen. Luckily, the US Dollar Index (DXY) can help with this.
Originally developed by the U.S. Federal Reserve in 1973, the DXY tracks the strength of the dollar against other major currencies. The six currencies included in the DXY are often referred to as America’s most significant trading partners and include the euro (EUR), Japanese yen (JPY), Canadian dollar (CAD), British pound (GBP), Swedish krona (SEK), and Swiss franc (CHF). By monitoring the DXY, traders can reduce the risks involved with buying and selling shares, meaning they can get the most out of their investment.
To become an investor, you don’t need to be a financial wizard. You need to know what you’re doing. By understanding what is actually involved in investing, alongside where you’re putting your money and the risks that come with it, then there’s potential for you to see a good return on investment.
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