Guidance for the beginner online investor


The internet provides a never-ending stream of opportunities for the budding amateur entrepreneur to make their mark – or simply make a little extra cash on the side.

However, with every opportunity there lies a large number of pitfalls that the unacquainted can easily fall into. Going into this business with a little bit of guidance on what to look out for can be the difference between gradually succeeding over time and hitting a brick wall on day one. Here are a few tips to help push you towards the former.

Understand the terms and conditions

No one wants to read them and most people don’t. But you can’t afford to be like most people, not if you want to avoid signing up to a contract you’ll later come to regret. Even if it means paying for specialist advice and interpretation, such minor costs will likely be a fraction of what you may later pay if everything doesn’t go to plan. On a separate note, if the person you’re dealing with has written up fair and clear terms from day one, then acknowledging this can help build a trustworthy relationship early on, the likes of which will help when communicating updates over the following years.

Understand your investment’s limitations

It’s always tempting when entering a market for the first time to focus entirely on the benefits of each tool or product on offer. This is because we naturally want to think about how well our investments could do, to dream about all the money that will (hopefully) be rolling in. Yet such starry-eyed visions have to be balanced alongside a full understanding of your investment’s limitations, for instance how long it will take before it could realistically begin turning a profit. Such a process usually dampens your mood, but it will at least safeguard your bank balance.

Know what options are open to you: Part 1

Take a case where you don’t know much about accountancy, something which will prove problematic with a particular investment you have in mind. So it helps to know what avenues you can turn down to overcome this hurdle. For instance, do you know any accountants personally, or students studying the practice? Would they be willing to spend some time helping you out? Or alternatively, what free or cheap third party providers are there who you could turn to for advice? Would the owner of the company or product you’re looking into know anyone who could help? Start asking questions and making lists early on.

Know what options are open to you – Part 2

When it comes to investment opportunities themselves, it’s tempting to jump straight in with the first promising option you detect on the horizon. In a way this could be considered opportunistic and decisive, which are admittedly both qualities which will take you far. But you also need to be pragmatic and understand that there are often various similar options available in any one field at any one time. The one you happen to have come across first may not be the best option available, so taking the time out to assess and examine the rest would often be worthwhile.

Assess your sources

Newspapers, magazines, family, friends – there’s a wide variety of sources you could be basing your investment decisions on. In practice, people tend to seek sources they find reliable – for instance, a particular industry newsletter which they’ve come to regard as trustworthy – and return to them regularly. However, it’s inevitable that you’ll occasionally be fed a piece of information from a source you’ve either never gone to before or only infrequently visited. In such cases, it’s worth assessing the credibility, reliability and trustworthiness of such people or publications before you move onto examining the opportunities themselves.

Transparent communication

When you invest in a company or product, you want to know everything that happens within it and to it. That means having a system in place whereby the owner or manager of said investment regular passes on relevant information and is frank about recent developments. It also works the other way too, as it helps build trust between you both if you are also very open about why you’re investing in this particular opportunity and what you hope to gain from it. Such communication can help resolve minor concerns before they grow into major disputes.