5 crucial investing lessons for beginners buying UK shares!

first_img Access this special “Green Industrial Revolution” presentation now Simply click below to discover how you can take advantage of this. Our 6 ‘Best Buys Now’ Shares Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Our 5 Top Shares for the New “Green Industrial Revolution” Image source: Getty Images 5 crucial investing lessons for beginners buying UK shares! Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.center_img Cliff D’Arcy | Wednesday, 19th May, 2021 I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. As a financial writer living in a university town in southern England, young people often ask me about the core principles of investing. I happily provide them with free advice, as well as recommending good books on the subject. Here are five principles that I aim to get across to newbie investors.1. Investing isn’t gamblingMany adults (of all ages) genuinely believe that investing in shares is no different to gambling. But gambling (playing games of chance) always comes with a ‘negative expectation’. For example, UK National Lottery games return only half of ticket sales in prizes. Thus, these have a negative expectation of 50%, which is truly terrible. I usually quote US fund manager Peter Lynch, who wisely said, “Although it’s easy to forget sometimes, a share is not a lottery ticket…it’s part-ownership of a business”.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…2. Spread your riskOne of the most important rules of investing is to diversify your wealth. This involves spreading money across equities (stocks and shares), property, bonds, cash, and other assets. By distributing our precious nest eggs across many baskets, we avoid being overly exposed to one particular asset, market sector, or company. Diversification also reduces concentration risk, which involves having too much riding on one specific asset. Failing to diversify produces portfolios that suffer from excessive volatility and risk.3. Don’t forget dividendsThe returns from investing in shares are twofold. First, capital gains: selling shares for a profit. Second, dividends: a regular cash income paid to shareholders. Many listed companies return cash to shareholders as quarterly or half-yearly dividends. Not all companies pay dividends, but most members of the FTSE 100 index do. The average forecast dividend yield for the FTSE 100 is currently around 3.8% a year. Failing to invest in dividend-paying companies means losing this passive income. Some research suggests that reinvesting cash dividends into yet more shares can account for up to half (50%) of the long-term returns from shares.4. Beware of leverageIn investing, leverage involves using borrowed money or financial derivatives to magnify the gains (and losses) from financial assets. The problem with leverage is that is it indiscriminate. Like a double-edged sword, it can harm as much as help. For example, let’s say I borrow £100 and invest it alongside £100 of my own money into a particular stock. If that stock halves in value, then my entire £200 will be wiped out. Excessive leverage wiped out the $20bn fortune of this US billionaire in mere days. Always remember: leverage is your best friend, until it’s your worst enemy.5. Trading isn’t investingIt’s vital to understand that trading isn’t investing. Trading involves taking short-term positions in, say, shares, currencies, commodities, and so on. If I buy an asset and immediately start thinking about when to sell it, then I’m short-term trading and not long-term investing. Traders usually aim to make quick money from small market movements over short timescales. Investors buy assets, particularly shares in good companies, with the aim of making superior long-term returns (sometimes over many decades). Almost anyone can be a successful investor, but rich traders are rare as hen’s teeth. Finally, if you get a buzz of dopamine (the feel-good neurotransmitter in your brain) when you’re dealing, then you’re probably trading and not investing. While investing can be boring, it really, truly works! Enter Your Email Address It was released in November 2020, and make no mistake:It’s happening.The UK Government’s 10-point plan for a new “Green Industrial Revolution.”PriceWaterhouse Coopers believes this trend will cost £400billion……That’s just here in Britain over the next 10 years.Worldwide, the Green Industrial Revolution could be worth TRILLIONS.It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead! See all posts by Cliff D’Arcylast_img read more

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