Knowing what to invest in as a new investor can be difficult and confusing. There are so many different products out there and approaches that you can take, and it can be hard to tell which ones will be the best suited to your needs and objectives.
Some of the most popular options presented to beginners include the stock market, foreign exchange, and cryptocurrencies. All of these options are indeed good for people who are just getting started, but they have specificities that need to be considered first. Let’s take a look at the pros and cons of each option and see which one would be the best for you.
The Pros and Cons of Forex for Beginners
Let’s start with foreign exchange since it’s often represented as the number one option for beginners. One of the reasons why the forex can be easier to understand for someone new is that you’ll be trading something pretty much everyone is familiar with. Anyone who’s had to exchange money has participated in forex trading and understanding some of the principles of forex may be easier to grasp as a result.
Another reason why forex trading can work for beginners is the high level of accessibility and liquidity. And understanding the factors that can move markets is a bit less complex than understanding what moves things like the stock market.
With that being said, making money in forex, especially as a beginner, is far from easy. You’ll need a solid strategy as you will be capitalizing on microscopic movements in currency prices. This means that you need to be right a lot to make substantial profits, and you’ll most likely need to use leverage, which can be a trap for beginners. So don’t assume that you’ll be able to look at the news and make money hand over fist with forex overnight.
Cryptocurrency has a lot of the benefits of forex like high accessibility and good liquidity. Cryptocurrencies can also be similar to fiat currencies but are not quite like them.
Cryptocurrencies are like a hybrid between fiat currency and stocks. While you have coins like Bitcoin and Litecoin that were made to work as currencies, you also have cryptos like Ether that were made to work within an ecosystem and power applications. So while some cryptos will be subjected mainly to the forces of supply and demand, coins like Ether will also be influenced by things like changes in governance, new projects being rolled out, or changes to the protocol.
This is why it’s essential that you don’t only look at cryptos as a monolith like many people do, and look at the price of special coins individually. If you were thinking of investing in ETH, okx.com is a great place to check out its price.
The biggest challenge with crypto is managing volatility. This is why it’s usually recommended that you put only around 20% of all your assets in crypto. High volatility also means, however, that there is much more potential for upside with them. This means that you could make a lot of money fast, even as a beginner.
Stocks are not always considered the most beginner-friendly trading option, and most people will agree. If your goal was to trade individual stocks, then this is going to be an uphill battle as even the most seasoned traders will have trouble making money consistently that way.
The most common way for beginners to invest in stocks is to use ETFs. ETFs are baskets of funds that are pegged together by managers or algorithms. These ETFs can then be traded over the open market like stocks. These can give you some modest earnings and are a safer option than investing individual stocks.
If you want to make a lot of money fast, stocks are not the best option, especially for a beginner. Your only chance would be if you were very gifted and used techniques like short selling with leverage. But this is extremely risky and not something that is recommended for most newcomers. So, if you’re ok slightly beating inflation with safe investments, stocks can work, but forget the idea that you’ll be able to start day trading your way into millions.
Any of these investment options could work for investors of all levels. Your final choice will ultimately depend on what you’re trying to achieve, how much risk you can handle, and how involved you want to be.