If you're new to , it can often be a daunting place as a lot of the concepts can seem very alien! Many people are quick to jump in with investing and excited to put their money to work. But quickly, they can find themselves losing money or at unnecessary financial risk.

Here at Pennies to Pounds, we'll be exploring the key terms which we believe every beginner and experienced investor should consider:

Goals

Before you get started in the investing world, it's crucial to know why you're starting this journey. Obviously, your ultimate goal is to make money, but everyone’s needs are different so consider your personal factors.

A good place to start is to ask yourself a few questions:

- What is my end goal?

- How long am I doing this?

- How much money do I want to make?

Risk Appetite

The next step is to decide how much risk you're willing to take with your investments. Have you considered what your risk appetite is? What is your stomach like for a sudden 20% drop in the value of your investments one day?

If that is not for you then perhaps you would be better looking at less risky investment options such as index funds or bonds as opposed to shares.

Time Horizon

It is important to consider the length of time you're looking to hold your investments for. How long are you willing to invest? This is crucial as it will affect how patient you can be in the market.

If you are happy to invest for 20 years, a 10% drop today probably won't make a huge difference as you'd expect it to climb back up by the end of time. However, if you need the money next week to purchase something, that 10% drop will be painful!

Knowledge

Once you have your finances in order, it is crucial to learn about investing. Study basic terminology, so you know how to make coherent decisions. about stocks, bonds and different funds. Knowledge is power. You'd be surprised at how many people invest in things they know nothing about. So, do your research!

Diversification

Diversification is the act of investing in shares or "assets" across a range of different classes, industries and geographies. To avoid losing too much money when stocks go down, make sure you have a diversified portfolio. That way, you will have some stocks that are rising, even when others are falling.

For example, your diversified portfolio may consist of some shares, index funds and bonds. This allows you to hedge any potential losses you may experience from one investment against another. Your risk appetite will play a factor in how many different investment options you choose to hold.

Composure

A crucial quality when investing is composure, patience and automation. The markets will fall and your investments will drop at some point, how prepared are you to just let it be and believe that they will rise again? For me, this all comes down to research.

Have you researched the companies/funds you're investing in? If you have, then you will believe that they will recover.

Study Your Portfolio

It is important that you always study your portfolio. What is right for your portfolio today, may not be the best for it tomorrow. It is important to know what you have, and where you might need to make changes in the future.

When the economic climate shifts, be prepared to make investment changes as well.

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