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7 Tips to Start Investing in he Current Situation

Are you thinking of starting a portfolio of funds in the current economic situation? Take note of these tips to start investing in 2021.

Equity markets post peak after peak as interest rates remain rock-bottom. 

The pandemic is still not over, but in return, the central banks could hardly maintain more lax monetary policies, injecting liquidity into the markets in spades. For anyone considering investing, we face a complex environment. The lack of alternatives, the improving economy and the support of central banks on the one hand, and demanding valuations and overwhelmed optimism on the other.

Here’s the best way to get started with these 7 key tips for new investors :

1. Do not trust fortune tellers

Fortune tellers don’t exist. When it comes to investing, you don’t have to pay too much attention to anyone (including a server). Never forget that the future is unpredictable, by definition, also when we talk about investments. The first step is to understand the current environment, and the most likely scenarios, but you should not act as if there is an absolute certainty to follow.

Right now, strategists who claim that risky assets can only go up are predominant. They may be right, or they may not. That is why you must build a portfolio that is resistant to different scenarios. Betting everything on one person is not investing; That is it, gambling.

2. Doing nothing is no solution

Perhaps you are one of those who do not see it clearly when investing, and prefer to wait for corrections that you can take advantage of later. These corrections may come, but when they do it is for a good reason (it is often difficult to dare to buy at such times). But they may also not arrive, or they may come from much higher up and you end up buying at levels higher than the current ones. Be that as it may, it is not good to be disinvested for too long.

Inflation is like having moths in a closet. You shouldn’t just stare at it like nothing’s wrong. Little by little, very silently, they end up eating the clothes. This simile is very valid to explain that inflation, which is expected to pick up, will end up making holes in the purchasing power of our savings, if we are not careful.

3. Resist first instincts

Unfortunately, our brain is not ready to invest. Not long ago, if we didn’t run at the slightest noise, we could be eaten by some wild animal. That is why we are not evolutionarily prepared to take risks.

It has been scientifically proven that most decisions are made instinctively (via the cerebral amygdala), not rationally (they occur in the prefrontal cortex, slower than the previous one), and that also happens when it comes to investing. If the body asks you to buy or sell everything, surely you should ask yourself if the decision is rational or impulsive. Resist the second at all costs when it comes to making your investment portfolio, most likely they are not the right ones.

4. The market is there to serve us, not to follow it

Precisely because most people make impulsive decisions and the markets are nothing more than the result of the above (their participants are still mostly human), you should resist the temptation to buy things just because they go up, or sell them because they go down , as if the market knew something that we do not know.

Always be suspicious when euphoria or catastrophism predominates. It is not about being contrary for no reason and selling when everyone is buying, but when optimism overflows, it usually means that investors are being generous when it comes to paying. So, it doesn’t seem like the time when you are going to find the best bargains. And vice versa, of course.

Not so long ago, just the opposite happened. In March of a year ago, investors sold everything, without much criteria, buying then quickly proved to be a good idea.

5. Give yourself time. 

In the long term, assets end up trading according to their fundamentals. Patience is one of the best ingredients for investing , which is why it’s among our top tips for novice investors.

It seems that doing nothing is negligent, but investing is exactly the opposite. Like fruit, investments must be given time to mature . Things don’t go exactly the way we want from day one, but that doesn’t have to mean something is wrong.

6. Know yourself as an investor

One of the worst things we can do is take levels of risk that are out of character. We all love making money, and we hate losing it, but a good investment ceases to be a good investment when we do not resist the temptation to sell when it seems that we are in the red. The truth is that you won’t be until you sell.

If you are going to sell insurance when it goes wrong, mark yourself a reasonably low maximum in risk assets, and try to buy very little by little and go averaging.

7. Be prudent, to be able to be brave when it is really worth it

We said that we don’t think there are many bargains, but it doesn’t seem smart to stare. Decide what level of risk you are capable of assuming and invest below . If the markets are still in bullish mode, you will make money. Perhaps less than you could have gotten if you had invested everything, but you will not stop earning it, which is not little.

And if the markets correct, against the forecast of the “experts” (excuse the inverted commas, but a server is a firm believer that it is not possible to be an expert in foreseeing the future), you will be able to take advantage of better prices.

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