The Best Investing Strategies for Beginners: A Complete Guide (2024)

The world of investing is expanding constantly, so it’s unsurprising that beginners can find it overwhelming. However, the benefits of investing are too many to ignore: secure retirement, financial confidence, staying ahead of inflation, and more. You can also choose to use proven strategies instead of experimenting with high-risk options when you’re just starting your investing career, making the learning curve far more convenient.

While the best investing strategies vary depending on the person’s age, income, lifestyle, and goals, there are several that are considered universal and more dependable. In this article, you will learn about four simple investing strategies and their advantages.

Index Funds Investing: What It Is and Its Advantages

Index funding is considered the best investment strategy for beginners. An index fund refers to a portfolio of bonds and stocks that are made to duplicate the financial market index. This investment strategy is passive, and its significant upside is lower fees for managing funds. The most popular benchmark indexes at the moment of writing are the S&P 500 and the Nasdaq Composite.

The advantage of index funds investing is that you don’t need to analyze each separate stock, saving you a lot of time. Purchasing an index fund is easy for beginners, while fees are low. As an added bonus, by developing a diversified portfolio, you minimize the risk of losing your money.

You can invest in index funds by opening a brokerage account. Another option you have is to open an investing account with a mutual fund company providing index funds that interest you.

Dollar-Cost Averaging as a Beginner Strategy

Dollar-cost averaging is another popular investing strategy for beginners. The way it works is that an individual has to invest a fixed amount in dollars regularly regardless of what the share price is.

The advantage of this strategy is that you don’t need to save up a large sum to invest, as you make scheduled investments in a specific asset over a certain period. Another benefit is that you don’t need to be focused on market timing.

To start, you can decide on the sum you can consistently invest in a month or a week. For example, you choose to purchase $400 per month of Bitcoin for 24 months. When you make this investment at the same time each month, you spread out buy points and thus ensure you don’t purchase too high all at once. Another use of dollar-cost averaging is to make regular contributions to your 401 (k) or individual retirement account.

Value Investing and How It Works

What is the best investing strategy for beginners who want to be more involved? If you are working on developing market analysis skills or are interested in active investing, you should consider value investing. In this strategy, investors buy financial assets that seem underpriced according to some criteria they deem important.

The logic behind this action is that an investor will get their returns once a company becomes successful in the future. Determining such promising companies requires knowledge of the market and being on the lookout for any changes. The benefit of this method is the potential for higher returns. Also, if the fundamental analysis is properly conducted, the risks are fairly low.

If you want to participate in value investing, you may consider shares in a company that sells smartphones and has been doing this successfully for many years. If this company develops an unpopular model, its stock prices will immediately drop, which is when you make your purchase. If you know that the company will recover from this setback, you can buy its stocks and thus benefit later.

What You Should Know about Dividend Investing

Another beginner strategy to remember is dividend investing. The term refers to purchasing stocks in companies that regularly pay dividends, i.e., provide payments to shareholders. For example, you may buy 100 shares of a company, with each of them costing $10. If a company pays you a dividend of $0.60 per stock, it means that you have invested $1,000 and get $60 in dividend payments over a year.

What is great about dividend investing is that you benefit both from capital appreciation of the purchased stocks and receiving income from consistent dividend payments. Dividend investing is associated with reduced risks and minimized volatility.

If you have decided to buy dividend stocks, you need to open a brokerage account. Finding a broker for dividend investing is not difficult, as it’s a passive strategy with a stable income. To choose stocks to invest in, you’ll need to assess dividend yield, look at dividend payout growth, and check the company’s track record.

Some people may be interested in dividend reinvestment to increase returns. The easiest way to do this is to have an automatic dividend reinvestment plan. This can be done either through a broker or a company that issues dividends.

Final Thought

The best investment strategies will differ in each case, depending on your lifestyle and financial situation. At the same time, the strategies mentioned in this article are great ones to consider. Index funding, dollar-cost averaging, and dividend investing are particularly good for beginners as they don’t require specific financial knowledge. Value investing is suitable for those who enjoy the analytical side of investing and are willing to dedicate their time to it.

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