Quora Answer: What Should I Consider as a Beginning Investor?

The following is my answer to a Quora question: “What things should I think about as a beginning investor?” 

You should understand your risk profile, and look for asset classes to invest that are commensurate with that.  Even if you have a high risk profile, you should never invest in anything, especially complex derivatives, unless you know what you are doing.  As a beginning investor, you will not know what you are doing.  You need to consider your investment horizon, and the targets you want to achieve by then.  These calculations need to consider worst-case scenarios, and inflation.  You cannot be overly optimistic. 

Based on the above, you work at building your investment portfolio.  In general, you may consider putting 60% into equities, and 40% into debt instruments, such as bonds.  You should consider investing into index funds instead of individual counters to mitigate risk.  You should consider spreading your risk exposure by investing across industries and regions.  Depending on where you want to retire to or spend your funds, versus where you invest, you need to look at currency and political exposure as well. 

If all this seems overwhelming, and there is no blame if you do feel overwhelmed, then consider shopping around for a good financial services consultant.  Investing is a science and should be treated as such.  It is not a lottery.  This means looking at data and making projections, not looking for tips from people “in the know”.