Start smart: Top picks for beginner investors – ETF editions

The financial markets beckon with the allure of freedom and flexibility. Imagine investing or even trading from anywhere, potentially replacing your day job! However, before diving in, it's crucial to understand that success isn't guaranteed.

This guide empowers you to navigate the exciting world of investing. We'll explore beginner-friendly instruments and markets to maximise your chances of success. We'll also highlight common pitfalls to avoid, equipping you with the right tools and knowledge for a smooth takeoff.

Foundations of Finance: Building Your Portfolio with Beginner-Friendly Instruments

Gold can be an attractive option for investors. It often moves in the opposite direction of the US dollar, offering a way to potentially hedge your positions.

However, it's important to remember that gold can also experience bigger price swings (volatility). This can be a bit trickier for beginners to handle.  To manage this risk, it's wise to start with smaller gold positions when you're first getting started. In the trading world, sometimes "less is more" applies!

Investing in gold directly isn’t available on most Cash Equity platforms but there’s a good alternative – doing it through Gold ETFs. This allows investors to invest in gold without a huge initial investment. Plus, in these unpredictable times, adding a bit of gold to your portfolio can be a smart way to play defence.

Select Gold ETFs available on CMC Invest:

IAU: iShares Gold Trust

GLD: SPDR Gold Shares

New to the stock market? The S&P 500 could be your perfect starting point. It tracks the top 500 US companies, giving you a piece of a wide range of businesses. The best part? It tends to be less volatile than some other markets, meaning your investments might experience smoother sailing. But here's the kick: even though the S&P 500 and the NASDAQ (another popular market) often move together, there can still be advantages to understanding both! Below are some ETFs you may wish to consider that tracks the S&P 500 index.

Select S&P 500 ETFs available on CMC Invest:

SPY: SPDR S&P 500 ETF Trust

VOO: Vanguard S&P 500 ETF

Before you dive into the world of ETF investing, here is something new investors should be aware of.

Highly volatile stock indices

While some markets offer smoother sailing (like the S&P 500 we discussed earlier), others can be a bit more like a rollercoaster at opening time. This is the case with indexes like the Hang Seng Index (HSI) and Nasdaq (NDX). These markets experience bigger swings right after they open, making it tricky to predict where things will go.

Keeping to a trading plan and note it down

Capture the moments for every position you entered or exit, along with everything else, in your investment journal. It's a powerful tool that helps you learn from your experiences and become a better investor.

Think of your journal as an investment coach. Here's how it works:

• Record your trades: Include charts to visualize your decisions.
• Track your thinking: Note down the technical indicators you used to enter the trade.
• Mind over matter: Jot down your emotions during each trade. Were you feeling confident or maybe a bit nervous?

By reviewing these entries, you can identify patterns. Did certain emotions cloud your judgment? Did a specific indicator consistently lead to losing trades? This self-reflection is key to improvement.

Risk Management

Before diving into the world of trading, it's crucial to establish some ground rules.  Your investing plan is like a roadmap, guiding you towards success. Here are key elements to include:

• Risk Management: Decide how much you're willing to risk on each position. This will help you avoid putting too much on the line.
• Reward Potential: Set a target risk-to-reward ratio. This ensures you're aiming to make more than you risk.

This article is for educational purposes and not to be regarded as investment advice, a recommendation, or an offer or solicitation to subscribe for, buy or sell any investment product. All forms of investments are subject to risks, including the possible loss of the principal amount invested. Losses can exceed your initial deposit. You should carefully consider your investment experience and objectives, financial situation, and risk tolerance level, and consult an independent financial adviser prior to dealing in any investment products. The contents in the article may have been obtained or derived from public or other sources believed by CMC Invest to be reliable. However, unless otherwise specifically stated, CMC Invest makes no representation as to the accuracy or completeness of such sources or the information, and accordingly accepts no liability for loss whatsoever arising from or in connection with the use of or reliance on the information. Please visit www.cmcinvest.com/en-sg/ for important information. This article has not been reviewed by the Monetary Authority of Singapore.