Investing for Beginners in 2021: The Complete Guide

There is a good saying: The best time to start investing was ten years ago. The second favorable moment was yesterday. The next one is today.

OK. Yesterday and ten years ago are all in the past. Why now? After all, it is logical to choose the right entry point. Buy shares at lows (corrections). What's the point of investing at the peaks (highs)? Better to wait for the fall. And buy cheaper assets. That would be more correct.

It seems to sound logical. But …

For a long investment period, estimated in tens of years (for example, when saving for a comfortable old age), what strategy is mainly used? "Buy and hold."

Statistically, markets always rise over long periods. And the longer the investment period, the less risk the investor bears. The probability of making a profit in a period of 20-30 years is many times higher than in a 1-3 year interval. Even taking into account the crises.

Article on the topic: How the investment period affects the result

Speaking of crises. According to statistics, they happen on average after 6-8 years. Every 3-4 years the stock market ends in the red. Accordingly, the longer the investment horizon, the greater the likelihood of experiencing not one, but several drops in the market.

Why am I doing all this?

If, for example, you are afraid to invest money now (at the peaks) and are waiting for a favorable moment to enter.

OK. We waited for the correction. You buy shares. You were able to successfully enter the market. But in a few years a new correction will definitely overtake you. And how might this affect future profitability? And specifically on the final financial result (profit).

Let's figure it out.

Invesco S&P Global Water Index ETF (ticker CGW).

Investors who are beginning to build their water portfolios can start with the Invesco S&P Global Water Index ETF. This broad-based, exchange-traded fund consists of 50 water companies, including utilities, infrastructure, equipment, tools and materials companies. More than half of these companies operate in the United States, with the rest scattered throughout the world. In terms of sectors, the fund is mainly split between the industrial sector (46.3%) and the utilities sector (43.5%).

The stock is up more than 4% since the start of 2021, but this water ETF is more of a defensive play than one that is likely to provide investors with big returns, with a 1.3% dividend yield.

Advice for novice investors

It’s not so easy to make money on investments, and the whole truth from investors with extensive experience and today already with substantial capital is that they also lost, but managed to build a competent strategy. I recommend always listening to the recommendations of experts, without thinking that “failure will bypass you.” The more sober the calculation, the higher the chances of success. Next, I’ll tell you about 6 fundamental positions that are relevant when you are going to invest in shares, trading on the stock exchange through a broker, or when you open an account with an online investment company. And let me remind you of one of the rules that has helped me out more than once - create a financial cushion and set aside funds from each profit received.

Drawing up an investment portfolio

Essentially, the portfolio should be balanced from different positions:

• Term of the work;
• amounts to start with;
• proposed level of profitability;
• acceptable level of risk.

There is no rule about how many instruments should be in a portfolio and when they can be safely increased. I recommend using 5-7 methods at once, which are very different. For example, a bank deposit and an online project combine well in one portfolio, equal to the same as stocks and federal loan bonds.

Turning off all emotions

An experienced and qualified investor never makes a decision just because his colleague or competitor received significant benefits thanks to a particular instrument. Decisions must be made carefully, soberly, having previously calculated not only the possible income, but also the risk to which you can expose your capital. Calculate how you can live if you lose your invested funds.

I think a typical mistake of many investors is the “desire to win back”: when the drawdown is too high, or the losses are huge, the investor thinks about doing at least something.

Determining the investment amount

Open any textbook or YouTube lesson with answers to the question of whether it is possible to make money on investments, and nowhere will you find the answer - how much you can invest. For everyone, this is their own indicator, taking into account both the level of stable earnings and the level of constant spending. I recommend starting with 10-15% of your income, and trying to save even when there is no income yet. In general, investing more than 25% of everything received is considered a very risky undertaking.

Distribution of funds within the portfolio

In professional slang this is called diversification. You can’t put everything into one or even two tools. Try to make your portfolio strong by combining offers with a good reputation, both average and low start, with different dividend payment periods from 1 day to several years.

Assessment of possible income and risks

I won’t say anything new, but you can’t buy only high interest rates. If you can’t mentally imagine which investment method is risky or which choice still has a high percentage, make a table. In one column, write how much you will receive, for example, in a month, and in the second, the approximate risk and when you can return the deposit directly and whether it is even possible to do this. This recommendation is always relevant when you want to make a profit from arbitrage trading or when you are thinking about investing in real estate.

Development of an investment plan

You should not start investing without a clear plan, which includes:

1. The goal is what exactly you plan to buy with the funds received.
2. When should we expect the first income, how frequent is the income and when is it planned to break even and then receive net income?
3. When can the deposit be returned?
4. When can you increase your investment amount?
5. When is it planned to achieve the “important” amount, for which, in fact, it all began.

Invesco Water Resources ETF (PHO).

Investors looking for a more targeted way to invest in water while maintaining fund diversification should consider the Invesco Water Resources ETF. Unlike the previous fund, PHO is based on the Nasdaq OMX US Water Index and is focused on tracking , according to Invesco.

As of the end of November, the ETF comprises 36 small- and mid-cap companies across a variety of industries, with the largest being industrials (51.3%), utilities (20.9%) and healthcare (15.5%). More than 97% of these holdings are located in the United States. A focus on the Nasdaq has helped shares of the Water Resources ETF rise 20% so far in 2021. The 0.4% dividend yield complements this ETF nicely.

Where to invest money to save it and increase it

We can conditionally divide ways of earning money into two groups: short-term and long-term.

One is to receive periodic payments over short periods of time. The second requires a long wait and is based on long-term investment.

In order to objectively assess the possibilities of receiving additional payments, you need to draw up a personal plan, reflecting the funds already available. The main task of this plan is to identify the relationship between income and expenses, as well as their optimization. Compilation can be done independently or with the help of specialists. When writing, you need to pay attention to those points that may affect the safety of funds and emphasize them.

Invesco Global Water ETF (PIO).

Like the Water ETF, the Invesco Global Water ETF tracks the Nasdaq OMX US Water Index. The difference is where PIO invests its money - this fund is more diversified and more focused on large-cap companies. While 51% of the fund's holdings are in the US, the remaining 49% is spread across the UK, Switzerland, France and other countries.

The fund's 43 stocks are divided among various sectors, with the largest being industrials (44.7%), utilities (30.6%) and healthcare (11.9%). This combination of stocks has performed well for investors, with the stock up about 12% so far in 2021. The 0.8% dividend yield is the cherry on top to attract water investors looking for a well-balanced, slow-but-steady ETF.

What is investment

Investment is any investment of funds for the purpose of generating income. Profit can be short-term or long-term. The amount of his income depends on which investment method a person chooses.

If this is an investment with minimal risks, like a bank deposit, the benefit will be only a few percent, and you will have to wait at least a year. If funds are invested in business or securities, then you can make good money, but there is also a high risk of ending up with nothing.

American Water Works (AWK).

American Water Works has water and wastewater facilities in 16 states and continues to expand. AWK added 47,000 customer connections in the third quarter alone, with an additional 19,000 expected by the end of next year. Continued growth in residential demand, as well as the beginning of a recovery in commercial demand for American Water Works services, helped business this quarter—and hotter, drier weather in several states where AWK does business, increased earnings per share by about 6 cents.

Speaking of earnings, American Water Works reported an impressive $1.46 per share for the third quarter, up 9.8% year-over-year, while revenue rose 6.5%. With strong earnings and a stock up over 20% in 2020, American Water Works is a great addition to any portfolio.

How to start investing?

We've now reached the end of this investing guide, and the last topic we'll cover, and the most important one, is how to get started investing. To do this you need to take only three steps:

1. Open a trading account.
2. Download your trading platform.
3. Select an asset, open the New Order window and place your first trade!

Ecolab (ECL).

Ecolab provides a wide range of water treatment and pumping services to a number of industrial clients, although the company has much more to offer beyond water. For example, its global healthcare and life sciences segment just posted the strongest quarter of any Ecolab division, with sales up 29% in the third quarter.

Unfortunately, this was the only bright spot in Ecolab's latest earnings as the pandemic-related slowdown continues to weigh on the company, causing Ecolab's sales from continuing operations to fall 6% year over year while EPS decreased by 24%. Despite the challenges, Ecolab shares are up 17% in 2021, and Ecolab sees a bright future for itself in which the world takes water treatment services much more seriously than before the pandemic.

Secrets of smart investing

Most people think about where to invest their savings. But it is equally important to understand how to do it. After all, one desire is not always enough for a good result.

Investment principles

In order not to burn out, it is enough to adhere to the following principles:

1. invest only after creating a financial “safety cushion” - it is equal to a six-month supply of money on which a family can live;
2. choose projects in which you can control risks ;
3. start with small amounts and increase your investment package as you gain experience;
4. create passive income.

The latter is very important, since the presence of such a source of income will be a good support in times of crisis.

Examples of successful investing

There are quite a lot of them. But we will consider only a few striking examples in different directions.

Example 1

So, the investor invested 70,000 rubles . to an online site that brings its previous owner about 2,000 rubles . per month. For a month and a half of work on the site, investments were increased by another 40,000 rubles . As a result, the project was sold at auction for half a million rubles.

Example 2

Another investor sold a property he inherited for RUB 3,500,000 . The proceeds were invested in foreign currency. After the rate increased, I sold euros and dollars. The amount received was enough to buy a better and more expensive apartment. In addition, 200,000 rubles . The investment period was one year.

Example 3

Another example: an investor lent money to an individual entrepreneur he knew, who was forced to look for sources of additional financing during the crisis. Every month he receives 8% of the amount borrowed for the year. As a result, the lender will receive a profit of 96% per annum.

Danaher Corp. (DHR).

Danaher is a diversified company with a number of water-related businesses in the industrial water treatment and water testing markets. The $159 billion market cap industrial conglomerate has much more to offer beyond water solutions, and it's that diversification that has supported Danaher throughout 2021.

Its solutions division (which houses its water business) was down 1% year-on-year - while revenue from its diagnostics division was up 18% and its life sciences revenue was up an impressive 72.5% year over year. In short, Danaher is a great choice for investors who want to diversify their investments a little more but still want to dip their toes into healthy water-related businesses.

How to start investing: what to look for when choosing an investment broker?

Choosing a broker plays a key role in your investment. Here are some tips for choosing a broker:

✅ Always choose a regulated broker. The British regulatory organization, namely the Financial Conduct Authority (FCA), is one of the strictest on the market.

✅ Make sure your broker offers a variety of trading and investment instruments and assets.

✅ Check the broker's customer service level as you may need assistance, especially if you are new

✅ See if the broker's website has different types of educational materials such as articles, tutorials, videos, seminars and webinars.

✅ Check broker commissions and spreads, as well as the cost of depositing and withdrawing funds from your account. Just because a broker has announced a low spread does not mean it will always be that way.

✅ Choose a broker with fast execution and low order slippage that has no restrictions for different trading styles and offers different types of trading accounts.

✅ Read the financial security policy. Choose a broker that segregates client funds (keeps your funds separate from their own) and offers negative balance protection.

Nasdaq Veles California Water Index (NQH20).

Investors were already able to trade gold, oil and other commodity futures, but as of December 7, 2021, they can now trade water futures. Specifically, it's water traded in California's $1.1 billion water market through the Nasdaq Veles Water Index, which tracks weighted average transaction prices across five California water markets.

Each contract represents 10 acres of water, or approximately 3.26 million gallons, but they are financially backed so investors won't have to worry about multiple pools of water showing up on their doorstep. It makes sense that water futures have emerged in California, the largest and most important agricultural market in the United States, and investors and farmers alike will want to lock in water prices now before shortages cause prices to rise.

Tips for Beginner Investors

I’ll say right away: there is no universal rule that allows you to receive a stable income without losing anything, just like pills that help with headaches, reduce weight or improve your mood. Do not think that without investments it is not possible to make a profit. Realistically, but it won't be big. Books, faucets, and bounty programs are best suited for this. I want to give you 5 pieces of advice that I constantly use myself: both when everything on the market was stable, plus or minus, and now, when many are studying proposals on where to invest money in a crisis.

1. Invest as if it were your last and you will never get your money back. It disciplines.
2. Don’t make investments “to spite yourself, or with the goal of “outperforming someone else’s income.”
3. Don't be greedy and don't buy solely on advertising or high interest rates.
4. Don't stand still. The first profit received is not a reason to be proud.
5. Keep records of profits and losses, and then you will clearly see your net income and what you can afford in the future.

These recommendations are always relevant when you want to open a deposit in an online project, buy shares of foreign or Russian companies, or constantly make money on investments in a house under construction. The last proposal allows you to generate income in several ways: sell the apartment at a higher price, making repairs or without it at all, and renting out the property.

No advisor will tell you how much you can earn from an investment. You can calculate the possible income within one instrument using an online calculator and find out what profit is promised within the initially stated conditions. As a result, I would like to draw your attention to the fact that you should not be afraid and choose only the usual methods: bank deposit, business investments. Today, the securities market is actively developing, and thanks to brokers like VTB, trading on stock exchanges is becoming accessible and not so “scary.” Start with minimal amounts and see if the method is right for you. It remains to wish everyone to master their own rules on how to make money on investments with minimal losses and high profits. Let your portfolios be beautiful and profitable.

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Author Ganesa K.

A professional investor with 5 years of experience working with various financial instruments, runs his own blog and advises investors. Own effective methods and information support for investments.

Where to get money for investment

You should not take out a loan for personal investment. Any investment of money is accompanied by risks. If the investment turns out to be a loss, then there will be no profit, but the loan will remain.

If you decide to take out a loan, adequately assess your repayment capabilities. Make sure you don't have to go hungry to make your monthly payments to the bank.

The loan is attractive only because you receive the money immediately - you can start investing without having any savings. But in this case, there is a risk of being left with interest-bearing debt, which will have to be repaid for several years.

Use only your own funds. You don't need to have a large amount to start inverting. You can start with just a few thousand rubles.

Risks and returns

The more money an investor invests, the more profit he receives if the project is successfully implemented. But every such event is associated with a certain amount of risk. A person gives his money, but no one can guarantee him the return of these funds.

To minimize the risk, you need to follow the rules:

• Invest only available funds - money the loss of which will not lead to collapse.
• Don't get emotional. Knowledge, experience and mathematical calculations are important in this matter.
• Check your partners for licenses and certificates, this will help you avoid scammers.
• It is not recommended to invest all your money in one project. Distributing funds across multiple areas reduces risks.
• Create a financial reserve in case of unfavorable investments.
• Withdraw the invested amount from the project when the profit reaches a sufficient amount.
• Develop a business plan and follow it.

There are professionals who can help you at the first stage and protect you from mistakes in investing. It is worth learning from them for competent investment management. If you follow these rules, the risk of losing money will be lower.

Simple example

What can be considered an investment? Any investment that will bring profit in the long term. Let's consider an elementary example. You bought a laptop at a big discount, and a month later you sold it on Avito at a higher price. This also refers to the concept of investment, although it will bring a small income.

Another example. You bought a used car in good condition and started renting it out. Six months later, the machine paid for itself and began to generate net profit.

You can continue the development of events in this example. When the car fell into disrepair, you sold it for parts, thereby reducing the cost of purchasing another car. Now you are already buying not one, but two cars with the proceeds from the rental. Now they bring in 2 times more income than before.

If you develop your business in this way, it will grow into a company and bring great profits. This is an example of successful investment.

In these examples, both the laptop and the cars are assets. As they increase, income also increases.

Types of investments

By maturity, investments are divided into 3 types:

• short-term – up to 1 year;
• medium-term – from 1 to 3 years;
• long-term – more than 3 years.

Depending on the nature of the object, investments can be real or financial. The first type includes investments in physical objects - real estate, equipment. Such operations are less risky - they are resistant to market changes and economic crises. They are often more profitable.

Financial investing is the purchase of securities. The tools for making a profit are stocks, shares, bonds, loans, options, indices, and futures. There is a higher risk of losing your invested funds.

For advanced users

Resale of domains and websites

The essence of making money is to buy the most beautiful and memorable domain names or domains with a high TIC, PR and sell them at a higher price.

Website development

For webmasters who are familiar with all the nuances of website building and their SEO promotion, there is an excellent opportunity to earn money by creating websites for the purpose of their further sale on the telderi service.

Referral programs

Participation in referral programs. Payment is charged for each registered user, purchase or a percentage of the earnings or amount of spending of the attracted referral (etxt, miratext, kwork, advego, Aliexpress and others). To place referral links, you must have your own platforms (website, promoted accounts on social networks and video hosting sites).

Traffic

Attracting traffic to partner sites is the most profitable method of earning money. Services - seriouspartner.biz, cpazilla.ru, partner.mylove.ru.

Dating websites

The essence of making money on the Internet is to attract referrals through affiliate programs. Reliable sites that pay money - owndating, lp-partners.

Investment goals

Investments differ in purpose and there are 3 main areas for investing money.

1. Direct investment is the purchase of a large number of shares to obtain a controlling stake. This requires huge capital. The investor receives more than 50% of the company's shares and actually receives the right to manage it.
2. Briefcases . The shares of those enterprises that are developing and are expected to bring greater profits in the future are being purchased. There is no goal here to get the enterprise itself, and shares are bought only to make money by increasing their prices.
3. Non-financial . These are long-term investments in tangible or intangible objects. Investors invest money in equipment, patents and copyrights, licenses, innovative technologies, and land.