Moize Goulamhoussen works as a Senior Portfolio Manager and Wealth Advisor for Designed Wealth Management. Benefiting from 20 years of experience in the financial services sector, he highlights the importance of trust and ethics throughout the industry. This article will look at investing in stocks and shares, weighing up aspects such as risk appetite and what and where to buy.
Investing takes a multitude of different forms, with investors placing their weight behind an array of tangible and intangible assets today. While some investors focus on popular targets such as stocks and shares, real estate and government bonds, others invest in more novel assets, such as vintage cars, wine, farmland, fine art or fledgling technology firms.
Investing in stocks is the process of purchasing ownership shares in public companies. Investors purchase shares in the hope that the business will perform well, causing the share price to rise, enabling the investor to realise a profit when the time comes to sell.
Many investors start to build wealth by purchasing shares via the stock market. However, while stock market investing presents the opportunity to earn an attractive return, it is important to appreciate that there are also considerable risks involved, posing the potential for the investor to end up empty handed if they fail to cash-in their investment at the right time.
To position themselves for the best possible chance of success, investors must start by establishing clear investment goals, deciding how much they wish to invest and determining their investment timeline and risk tolerance level. The investor then needs to find a broker that matches their trading style. It is then simply a matter of funding their account and purchasing their first stocks.
Investment goals may vary significantly from one investor to another. For example, whereas one investor may be saving to fund their child’s college education, another may be trying to secure a comfortable retirement or saving for a vacation or new home. An investor’s objectives will vary according to their life stage and ambitions, with younger investors typically focused on growth and long-term wealth accumulation and those closer to retirement generally concentrating on capital preservation and generating a steady income.
Along with the financial objectives, investors need to determine their investment horizon. They also need to evaluate their finances, being realistic about how much they can afford to set aside for their investment goals according to their regular income, savings and any other financial resources. Financial planning is an ongoing process that needs to adapt as life changes, with investors regularly reviewing and adjusting their financial goals in line with changes in their life circumstances.
There are numerous financial instruments available for stock market investors today. Each works in a slightly different way, with varying degrees of risk and potential returns. Popular routes include investing in index trackers or selecting individual stocks and shares, although the latter option demands a considerable amount of research. Unit trusts and funds are ideal for investors who wish to venture into the world of stock market investing but lack the time or interest in learning how to analyse stocks. Investing in a fund places the weight of investment choices on a fund manager, in return for an annual fee. Of course, not all fund managers are created equal, so it is crucial for investors to conduct careful research on potential candidates.
Investing in stocks is a popular means of building wealth, albeit one with a significant risk of incurring losses. With a multitude of online trading platforms and investment resources available today, new investors benefit from a wealth of information at their fingertips, providing expert advice to help them make smarter investment decisions.
