Education is the key to successful investment

Date published - 8 Sep 2021

Education is the key to successful investment

Knowledge and experience are commodities that are extremely valuable in the investment world. The moment you stop learning, stop adapting and believe thatyou "know everything" is when you are most at risk. Stock markets are constantly evolving, new trends emerging, and investors need to move with the times. We will now look at various areas of education about successful investment and how you can help yourself.

How do stock markets work?

The best way to describe the stock market is an information exchange. This information is used to dictate stock price movements to give a "fair value" at that moment in time. There are two different types of "information", which include:-

Public information

This information has been announced to the markets and can have a significant impact on stock prices.

Inside information

This is information that has yet to be released into the public domain – sometimes just rumours. While authorities continue to fight insider trading, this is a never-ending battle reflected in "unexplained" price movements.

So, while many people believe that stock market movements and prices reflect public information, they also indicate inside information. As you become more experienced, you will learn how to read the markets, adapt to rumours, counter rumours and what may be going on behind the scenes. It is always good to be aware!

How to start investing in stocks

It is safe to say that the Internet has revolutionised how individuals and companies invest in stock markets. Online investment platforms offer research, valuable articles, and the ability to trade specific stocks and shares. Thankfully, this increased competition has seen trading costs plummet.

There are numerous factors to consider as you start investing in stocks and shares, such as:-

• Your financial situation
• Your long-term targets
• Areas of interest
• Areas of expertise
• Collective investments
• Investment in individual stocks and shares

It is essential to focus on your expertise and areas of interest while also expanding your knowledge base going forwards. It is also crucial to take advice from professional financial advisers - especially while you find your feet in the world of investment.

Why are stock markets so important?

There is a dangerous misconception that stock markets are simply casinos for wealthy investors. This is quite simply wrong!

The best way to describe the stock market is a secondary market where stocks and shares are traded. Without this ability to trade, companies would struggle to raise funds, expansion plans may be curtailed, and the vital scrutiny from research analysts would never reach the public domain. Due to the information exchange characteristics, stock markets can digest public and private information, supply and demand and arrive at a "fair value" for individuals stocks and shares.

There is a consensus that stock markets tend to look nine months in advance, although this is a hot topic. Even with the enormous amount of information taken in by stock markets, individual stocks and shares can still shock and surprise. You can guarantee that no one day in the stock market is ever the same as any other!

Different types of investments

One of the many attractions of stock market investment is the vast range of investment classes. These include:-

• Stocks
• Bonds
• Collective investment/Mutual funds
• Debt instruments
• Traded options
• Investment in individual stocks and shares

If we dig a little deeper, volatility and risk factors can vary enormously within individual classes and across the different types of investment. So it is safe to say there is something for everybody.

Summary

The moment you stop educating yourself on investment, stop appreciating the thoughts of others is the moment that you are in the greatest danger. Stock markets can be a volatile animal, investment trends change regularly, and we all need to move with the times. However, a basic understanding of what stock markets have to offer, how they work and different types of investment are the foundations for a long-term career in investment.

Ultimately, you are in charge of your destiny, how your funds are invested and how you use the array of investment tools at your disposal. To coin a political phrase, it is all about education, education, education.