Do you want to start investing at a young age with minimal risk? If YES, here are 10 easy steps on how to become an investor from scratch with little money.
“Many people rush into the game of investing thinking they are predators. When they get to the middle of the game, they then realize they are the prey and try to escape but it will be too late. Only the preys with a well defined exit strategy will escape, the rest will be slaughtered by the real predators.” – Ajaero Tony Martins
What is the best business to start with my savings? What is the best investment opportunity with good return on investment? This is one of the questions i get asked frequently. A lot of individuals are also interested in investing their money for returns but they don’t seem to know where to begin or how to start.
Some even start investing only to have their fingers burnt because they didn’t get it right from the start. So in this article, I will be sharing with you a step by step guide on how to start investing your money without getting your fingers burnt.
How to Become an Investor from Scratch With Little Money
Table of Content
- 1 i. Prepare your mindset
- 2 ii. Select your choice investment product
- 3 iii. Prepare a financial plan
- 4 iv. Get the basic training / education
- 5 v. Find a good broker / financial adviser
- 6 vi. Start investing
- 7 vii. Get more in-depth training / education
- 8 viii. Make mistakes and keep learning
- 9 ix. Stick to the process
- 10 x. Count your wins / losses
i. Prepare your mindset
“Getting rich begins with the right mindset, the right words and the right plan.” – Rich Dad
The first step I recommend for anyone wanting to become an investor is to first get in the right mindset. Most financial advisors often skip this basic investment advice without knowing that this single tip is the difference between the successful investors and the average investors.
There’s lot of tips to share when it comes to getting yourself in the right mindset but I will keep things simple for now. Before you start investing your money, whether in stocks, real estate, commodities, bonds or whatsoever; you must first answer an important question and this question is:
- Why do you want to become an investor?
The answer to this question is the foundation on which you can begin preparing your investing mindset. Your reason for investing is a determining factor for success or failure, so it’s advisable to start investing for the right reasons.
Don’t become an investor because you are interested in learning how to become a millionaire fast. Now aside your primary reason for investing, there are other questions you need to answer that can help prepare your mindset for the game of investing.
- How do handle failure?
- Are you prepared to risk your money?
- Are you emotionally strong to handle the ups and downs of investing?
ii. Select your choice investment product
Successful investors that have mastered the game of investing can switch from one investment product to another with minimal risk but for you an investing beginner, it is advisable you first focus on one investment product and follow it through. Are you going to start investing in stocks, real estate, commodities, etc?
- Do you want to become just an accredited investor or a sophisticated investor?
- Do you want to become an angel investor?
- Do you want to become a property or real estate investor?
- Do you want to become a private investor or stock investor?
The choice is yours but whatever choice you make, make sure that you are prepared to learn it through.
iii. Prepare a financial plan
Every business begins with a business plan, so also should every investment begin with a financial plan and an investment plan. Most people invest without a financial plan or investment goal; but I will advice you do otherwise.
Why are you investing? What is your investment goal? Where do you want to be financially in the next ten years? Is your investment plan going to help you achieve your financial goal? These are the questions you must answer before you start investing your money.
To prepare a financial plan and set an investment goal, you must first know what your present financial status is; and where you intend to get to. You must also prepare your financial plan alongside your investment goal; because both must work together. At this stage, it’s advisable to consult a competent financial adviser to work with you on your financial plan.
iv. Get the basic training / education
This is another point where most investors get it wrong. Many investors today are investing without financial education and competent investment training. They are simply investing blindly or following the advice of financial advisors or brokers and that’s why most people lose their money.
“People without financial knowledge, who take advice from financial experts are like lemmings simply following their leader. They race for the cliff and leap into the ocean of financial uncertainty, hoping to swim to the other side.” – Rich Dad
Before you start investing, I recommend you get the basic training with respect to the investment product of your choice. Whether you want to invest in stocks, real estate, small businesses, bonds or commodities, please first invest in yourself by getting the necessary education and training.
v. Find a good broker / financial adviser
“Seek advice on risk from the wealthy who still take risks, not friends who dare nothing more than a football bet.” – Warren Buffett
Having a good broker is a very important requisite for achieving success as an investor; regardless of what your choice investment product is. Now how do you know a good broker?
Well, I don’t have a definite answer to that. All I can say is that you should find a broker that will be willing to work with you. This is important because some brokers only work with high networth individuals and some will attend to the average income earners.
“Business is a team sport; so also is investing.” – Rich Dad
Secondly, I will advice you get a broker that will perform your mandate timely. You should also find a broker that will be ready to enlighten you about a particular product or offer you investment advice when you require it.
And lastly, choose a broker that invests in what he preaches. Never work with a broker/financial adviser that don’t generate a bulk of income from investments; never work with a broker who lives off salary and commissions. Work with a broker/adviser who actively invests; you will learn a lot from such a person.
vi. Start investing
“Business and financial intelligence are not picked up within the four walls of school. You pick them up on the streets. In school, you are taught how to manage other people’s money. On the streets, you are taught how to make money.” – Ajaero Tony Martins
This is the stage where you put your money to work; this is where you take your baby steps. Just as you cannot learn how to start a business by reading a book, the same goes with investing. You have to take action for you to see any real result.
When you get to this point, you will definitely be filled with fear and excitement but don’t panic. Remember that you are not investing for only money at this stage; you are investing also for education and some real life experience.
vii. Get more in-depth training / education
After you have learned the basics of investing and have started building some experience by actively investing, I will advice you go for another round of training but this time; your training will be based on advanced investment strategies.
viii. Make mistakes and keep learning
Another important requisite for becoming a successful investor will be your ability to learn from your mistakes and failure. To become a successful investor, you must be able to go from failure to failure without losing your enthusiasm. You must see your mistakes and failures as learning opportunities; this is what makes you an experienced investor.
“A mistake is a signal that it is time to learn something new, something you don’t know before.” – Rich Dad
As you make mistakes, take some losses and learn; you will now begin to know what works and what doesn’t. You will now begin to initiate your own investment strategy and thus, you will now be competent enough to give out investment advice to other investing beginners.
ix. Stick to the process
“Experience taught me a few things. One is to listen to your gut no matter how good something sounds on paper. The second is that you are generally better off sticking with what you know and the third is that sometimes, your best investments are the ones you don’t make.” – Donald Trump
In business, not all startup business ideas become a winner; so also it is in investing. In the process of investing your money; you are going to contend with a lot of things; such as market volatility, trends, emotions, lack of capital, inability to access a bank loan, inability to find a good partner/investor, etc.
But regardless of what you encounter, you have to stick to the process. You have to keep cool and follow your winning strategy. Investing is not a one hit affair; it’s a game that requires continuity.
x. Count your wins / losses
“Money was never a big motivation for me except as a way to keep score. The real excitement is playing the game.” – Donald Trump
Investing is a game and money is how we keep score of our successes or failures. Successful investors set a time frame in which they conduct a portfolio review to analyze their performance; you should do the same. Make it a rule to conduct a quarterly performance check on your portfolio and strategies; it is a crucial investing fundamental.
As a final note, this is my ten step process to starting your investing career. This is my ten step process to becoming a successful investor. Follow these steps diligently, and I will see you at the top.