First investment: things every investor should know before starting out

If you are about to start your first investment, it is important to keep a few things in mind before you begin. Such as a guide of basic tips for beginners that can save you at certain times.

Investing can be a great adventure, challenging and even complex for those who want to take their first step.

And before that, it’s crucial to have a solid understanding of the key considerations and principles that guide success in this area.

In the beginning, it is common for novice investors to face many difficult decisions, unfamiliar terms and certain difficulties.

Investing involves risks and rewards, and the pursuit of financial returns must be guided by knowledge and strategy. 

From setting investment goals to understanding the different types of assets, the importance of diversification and risk management, all of this encompasses the world of financial assets.

What are investments?

We often think of the financial market and investments as something complex, when in reality the concept is not that complex.

Investments refer to the act of allocating financial resources to assets or projects with the expectation of obtaining positive returns over time.

This process involves carefully analyzing available options, considering financial goals, and assessing the associated risk.

The assets in which investors put their money can be in many forms, such as stocks, bonds, real estate, investment funds and other financial instruments.

When we are investing, our main motivation becomes capital growth, the pursuit of specific financial-related goals or income generation.

Types of investments

There are several types of investments available on the market. Before making your first investment, it is important to understand that each of them has different characteristics, but in general they can be divided between fixed and variable income.

Fixed income investments are those that will offer a more predictable return, which is defined at the time you invest. So from the beginning, you can know how much you will receive from your investment.

Examples of fixed income can be savings, direct treasury, CDB (Bank Deposit Certificate), LCI (Real Estate Credit Letters), LCA (Agribusiness Credit Letters), CRI, CRA, LC and others.

And in the case of variable income, these are those that do not offer predictable liquidity, so it will depend on the market performance, which during the investment period can be positive or negative.

Variable income investments can be stocks, investment funds, commodities, real estate funds, options market, futures market and much more.

What to know before starting your first investment?

Now that we have a basic understanding of the financial market, we can move on to what you need to know before starting your first investment.

1 – Study about investments

Before you even start your journey to your first investment, you need to dedicate time to studying. Learn about the terminology, different types of assets and everything that is involved.

With the internet we have much more information at our fingertips, so explore reliable sources, books, online courses and financial news portals.

2 – Discover your investor profile

There is a lot of talk about the investor profile, and this is an interesting step to take before starting. It involves analyzing an individual's characteristics in relation to their investments and the risks involved.

In the financial market there are three types of investor profiles: conservative, moderate or bold.

By defining the investor profile, you will be able to understand which investment portfolio is most suitable and how much risk you are willing to take.

The conservative profile represents investors who are willing to deal with low risks, preferring fixed income investments. While the moderate profile is aimed at those who like to take risks carefully, mixing investment types.

And finally, the bold profile is for those who are willing to take high risks, investing in variable income, shares and high-risk investment funds, types that generally suffer more volatility.

3 – Learn about risk and liquidity

Understand the concepts of risk and liquidity is crucial. Know that riskier investments may offer higher returns, but they also increase the possibility of losses.

Also, understand the liquidity of your assets, i.e. how easy it is to convert them into cash, as this affects your ability to access funds when needed.

There are different types of risk and liquidity, and when we think about the relationship between the two concepts, we have to think that the greater the risk, the greater the possibility of there being less liquidity.

4 – Think about your goals

Setting clear and realistic goals is an important step in your first investment. Starting without an end point will make your process impulsive and messy.

Whether it’s buying a home, retiring, or educating your children, having specific goals will help guide your investment decisions. Your goals will determine the investment horizon and approach you should take.

5 – Be patient

As the saying goes: patience is a virtue!

Successful investments require patience. The financial market is dynamic, and returns can vary over time.

It's normal to feel impatient waiting for your assets to yield great returns, you won't get rich overnight.

Avoid impulsive reactions to market fluctuations and maintain a long-term vision. Patience is a powerful ally in achieving solid results.

Also work on your emotional intelligence to act with reason and not with emotion when faced with losses or gains.

6 – Know what diversification is

Diversifying your portfolio means spreading your investments across different asset classes and sectors.

It is essential to have this practice, as it is one of the best ways to reduce negative impacts due to performance. So, if you have two diversified investments, if one of them results in a total loss, you will not be left empty-handed.

We have concluded our list of things you need to know before starting your first investment. And what we can teach you is that experience comes with time, but also don't be so hasty as to take unnecessary risks.