Beginner Tips to Investing in the Financial Markets

 Asset classes refer to different groups of investment vehicles, classified according to the similarities they share such as stocks, bonds, real estate and cash.

Equities or stocks are a way of owning shares of publicly traded companies such as Tesla. Stocks allow you to earn when the share price of the company rises or via the payment of dividends. This asset class is further broken down according to the market cap so that there are small-cap, mid-cap, and large-cap stocks. Degiro, Interactive Brokers and Revolut are a few trading platforms that allow you to begin investing in the stock market.

Fixed-income investments are investments in debt securities that pay you “interests”. These interests are set according to rates and last within a period. Bonds are less risky investments because they include risk-free or guaranteed assets. You can buy bonds from your bank.

This asset class is “real” assets, investments in physical properties, rather than financial instruments. It is a good hedge against inflation. Fundrise can help you as it is a good platform for investing in this asset class.

Derivatives are financial instruments that are an offshoot of an underlying asset. An example is stock options; a derivative of stocks.

Other classes include:

• REITs: allows for investment in the portfolios of real estate assets through the purchase of individual company stock.
• Exchange-traded funds (ETFs): offers exposure to the energy market

Alternative investment attracts more risks and at the same time, more liquid. They include:

• Cryptocurrencies
• Hedge Funds

Portfolio Diversification

Most financial experts encourage investors to diversify their portfolios by investing in different asset classes. This is to help mitigate the risk of losing out on all your investments If a particular asset class experiences a downturn.

Also, diversification can help curtail volatility; an upswing in one class can make up for the loss that results from a downward movement in others. 

Also, this strategy caters to your:

• Financial and investment goals: both short-term and long-term.
• Tolerance for risk (market volatility)
• Desire to invest in specific types of investments

1. The value investing strategy is an effective less-risk strategy for stock investments.
2. Use a dollar-cost averaging system to reduce the impact of volatility on your investment.
3. Invest in growth stock companies such as Johnson and Johnson, IBM.
4. Invest in blue-chip companies like Amazon and Facebook.