Tron – Investing for Beginners – Quiz
Investing gives you a solid opportunity to grow your money.
While investing for beginners can seem overwhelming, by examining your needs and goals, you can create an effective—and profitable—investment strategy.
Getting started with investing involves the following:
Different types of investments have varying risk levels, timelines, and management needs.
Learning what type of investor you are, and matching your needs with the right investment, will help you create the best strategy for making money.
If you’re looking for a quick return where you only hold your investment for a few weeks, or less than a month, consider trading stock options.
If you’re looking for an investment timeline of less than a year, and you are comfortable with investments that see a lot of price fluctuation, take a look at cryptocurrencies.
Growth stocks may be an option if you’re looking to invest for more than a year, while dividend stocks would be an excellent option if you’re thinking of investing for more than 5 years.
Investing in startups and seeing a significant return frequently takes over five years.
Or if you’re looking to grow your investments for a significant return over a long timeframe, you may consider growth or dividend stocks, or even investing in a startup to get on the ground floor.
It’s important to understand there are no guarantees with investing; it’s never zero risk. There’s always a chance – although sometimes very small – that you lose whatever you invest. We do our best to highlight opportunities that have a very low chance of that, but if you can’t afford to be without funds, conduct more research before investing.
Understanding your own risk tolerance can help you understand what type of investment is appropriate. While investing for beginners may start with a low-risk investment such as a dividend stock, some investors may choose to trade in options or cryptocurrencies.
There’s no wrong answer. It depends on the time you have to devote to investing and what your ideal commitment is.
Typically, the shorter the time frame you want a return in, the more frequently you’ll have to manage your trades.
Others may be fundamental investors with some level of investment knowledge from their own research and experience and may even purchase stocks on occasion through a broker. These investors could still be considered closer to beginner than advanced, depending on how much they understand about all the different types of investments. For example, trading options is much different than buying and selling stocks.
Various apps offer the ability to trade online. These apps include WeBull Financial. WeBull provides an excellent opportunity for beginning traders while also providing options for intermediate and advanced traders.
Robinhood is another useful app for beginners. Robinhood offers educational articles and the ability to invest. In December 2017, Robinhood announced it had launched commission-free options trading, meaning no fees for buying or selling options contracts.
Before choosing an app, make sure to read its terms and conditions and all the details. You’ll want to make sure you can access your funds when you need, and you’ll want to understand any changes in your balance as you buy and sell. Whatever you do, don’t panic if something doesn’t look right. Make sure you know how to get in touch with customer service and clear up any concerns.
To learn more, you may consider taking a course dedicated to investing or options trading. Classes provide a great way to learn the skills you need to master investing.
Cryptocurrencies are assets outside of the stock market. However, big investors such as pension funds, family offices, hedge funds, and retailers are starting to get involved with cryptocurrencies after years of focusing solely on stocks and stock-related investments.
Startup investing is outside the stock market and offers a creative opportunity for an investor to get involved with a new business. Some investors may also act as a mentor or advisor to the new business owners.
Are you interested in following the stock market, or do you like more exciting and unique opportunities that could allow you to be more creative with your investments?
Asking yourself these questions will help you choose whether or not thinking outside the box and investing outside the market is for you.
Growth stocks are stocks in “high-growth” companies, or those which are expected to grow faster than what’s average for the market. High-growth companies are frequently in their early or mid-growth stages, and may be growing quickly, or at least faster than average for the market.
Because of their focus on growth, these companies invest a lot of their money in product development and expanding their market share, and typically don’t put money toward paying a dividend to shareholders. Investors instead enjoy bigger share-price growth than they’d get with other stocks.
One of the benefits of growth stocks is that they can be good for both short- and long-term gains, which may be of interest to beginner investors.
They could grow 25%, 50%, or even more in just a month or two, and see shares double, triple, or even better over more time.
When looking for growth stocks, make sure the company is well established, well managed, has a solid sales history, and that the market is favorable to its industry.
The less history the company has, the less reliable information you have to review on their profitability and potential.
Dividend stocks are those that pay a set amount of money to shareholders, based on how many shares they hold. Companies that pay dividends are typically more established than the average, and they have enough profit to share with investors. They aren’t in a high-growth phase where most of their money is invested in expanding their business. Most dividend-paying companies pay their dividends on a quarterly basis, although some pay monthly. Healthy companies increase their dividends over time.
As a lower-risk investment, they can provide a form of passive income annually. This income may be less than the other investment types, but it may also be more dependable.
Dividend stocks may be good for beginners because their share prices can be less volatile than growth stocks. They can be a reliable core holding for a portfolio.
Options trading is when you buy or sell a contract that gives you the right to buy or sell shares of a stock (the underlying asset) – but you don’t actually own shares of that stock.
There are two main types of options: puts and calls. A put is the right to sell a stock at a specific price – it’s a bet that a stock will fall. A call is the right to buy a stock at a specific price – a bet that the stock will rise.
Every option has an expiration date, because it’s a contract that has a specified “lifespan.”
Options may be a good opportunity for someone to invest who has experience and is more interested in trading, rather than owning stocks. Trading can offer faster, and bigger gains than holding shares of stock.
Since options have a date attached to them, they typically require more attention and involvement. Options are managed on a weekly to monthly basis and can provide a larger profit more quickly than other investment options. It’s possible to invest less with options at a low risk and get a larger relative payout than you would from buying and selling stocks.
Cryptocurrencies are digital currencies that became popular with the rise of Bitcoin, which was considered a manipulation-proof alternative to paper currency, one outside of government control. Some, like Bitcoin, rely on a blockchain to function. Blockchain is record-keeping technology designed to keep your cryptocurrency safe.
Cryptocurrencies can be volatile, as they are a newer asset and can see large in- and outflows of investment. Because of this volatile market, cryptocurrencies are considered higher risk than most stocks.
Bitcoin is the most popular cryptocurrency, and many people are familiar with Ethereum. Newer cryptocurrencies gaining popularity include TRON and Ripple.
Cryptocurrencies have great potential for a high return. By the end of 2020, Bitcoin forecasts are as high as $100,000 in the next year or two. The long-term cryptocurrency forecast also looks good, with the Crypto Research Report identifying Bitcoin as having a price target of $341,000 by 2025.
Cryptocurrency needs to be managed more frequently than most stock holdings, on a weekly or monthly basis.
Startup investing comes in various forms, including angel investing, which provides capital and often oversight as a new business gets started. Angel investors can be involved in business decisions and provide advice and direction.
Startup investors also include venture capitalists. Venture capitalists, though they may not have a relationship with the business founders, frequently provide significant amounts of funds to carry a startup to an IPO.
Investing in startups can be risky because you don’t have a lot of the company’s history to base your decision on. But the profit potential is huge.
Just look at Amazon. Amazon founder Jeff Bezos had 22 investors back his company for 1% of the business. They went on to receive an astounding 14,000,000% return on their investment.
Startup investing is typically better for more experienced investors with available capital. These investors are often business owners, former business owners, or those experienced in business. Someone who wants a more “hands-on” opportunity may consider startup investing.
The risks associated with startup investing can be considerable, but there is also the potential for significant reward. You can mitigate the risk of startup investing by limiting how much you invest. Startup investors may consider placing a maximum of 10% of their overall portfolio in these early-stage investments, and that 10% can be spread out in a variety of individual startups.
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