Finding the perfect hobby to engage in can be quite a task in a world filled with endless possibilities. But as pursuing financial independence and wealth creation gains popularity, many individuals consider investing as a possible hobby.
Investing has recently become a buzzword. This is all down to the two reasons we just mentioned. But is it truly possible to invest as a hobby and not as a main occupation? Some say it is, and some say otherwise. Regardless, investing offers the opportunity for tremendous financial growth. But investing is a high barrier-to-enter profession that can also be highly risky.
Like any other hobby, beginner investors must learn the ins and outs of investing before even considering the possibility of wealth creation through investing. Moreover, investing is a broad niche with a tremendous learning curve. As Warren Buffet said, “Never invest in a business you cannot understand.” While investing doesn’t categorize as a business, the same logic applies to investing in any security.
So that’s why we decided to explore the idea of investing as a hobby, discuss its viability, and provide valuable tips for beginners who wish to embark on this exciting journey. Let’s begin.
Investing as a Hobby – Is It Possible?
Yes, investing as a hobby is possible. But before you jump at the opportunity to invest in your free time, consider the following. Buying stocks in your spare time is all good, but is it possible and, most importantly, feasible in the long run? Do you hope to create wealth by buying and selling stocks only in your free time?
The idea and concept of investing as a hobby has been gaining traction over the years. However, by definition, a hobby is something you do in your spare time for pleasure. So you don’t necessarily have to be excellent at it, but you must find enjoyment in it.
So if you’re not particularly fond of the idea of investing, is it a clever choice to invest in your spare time? The answer will likely vary from one person to the next. But prospective hobbyists should have a passion for finance, economics, and strategic thinking before considering investing as a hobby.
With that said, investing as a hobby is possible. So long as you enjoy it, are passionate about it, love the thrill of strategic thinking, and are comfortable taking on significant risks, investing as a hobby is possible.
Now, let’s look at several tips to help beginners try investing as a hobby.
7 Tips to Help Beginners Try Investing as a Hobby
We aim to educate readers on financial practices, including investing. Therefore, we have created a list of seven tips to help beginners overcome the complexity and learning curve of investing.
Educate Yourself on the Core Concepts of Investing
The world of investing is vast and complex. Therefore, the first thing to check off your to-do list is to educate yourself on the basics and core concepts of investing. You could read books, buy a course, and follow reputable financial sources to get up to speed.
But most importantly, you must understand the different investment vehicles, strategies, and tools to help you enjoy investing as a hobby.
Since you’ll be investing as a hobby, you must avoid making the crucial mistake of “going big.” Beginners who lack a basic understanding of investing can fall into the trap of “going big” to make huge profits when investing. Instead, always start small and learn as you go. You can also try paper trading, as it is a risk-free form of learning the basics of investing.
Learn the Importance of Diversification
Throughout your education, you’ll encounter a term known as “risk management.” Risk management is a crucial concept in investing. In investing, risk management refers to practices that help you identify, analyze, and mitigate risk.
Diversification is key to managing risk when investing. Diversification encourages spreading your investments across different asset classes, including stocks, bonds, mutual funds, and even real estate. Even if you plan on investing in stocks as a hobby, you must spread risk by investing in stocks across different sectors.
That way, you minimize risk while also increasing the likelihood of earning positive returns if your investments perform excellently.
Set Clear Goals
Since you’ll be investing in your free time, you must set clear and achievable goals to help you maximize your investments and time. For example, many investors invest as a hobby to accumulate enough wealth for a specific purchase. Others do it to help with their mortgage payments, eliminate debt, etc.
It’s essential to set clear goals to keep yourself focused on why you’re doing it, even if you primarily do it out of pleasure and passion.
Do It in Your Free Time
Investing is a hobby as long as you do it in your free time. When investing takes precedence over other areas of life, such as work or your family, you should rethink your strategy. As mentioned earlier, a hobby is an activity that we love doing. It helps us relax, keeps our mind preoccupied, and in the case of investing, it helps us get something more out of the hobby.
If you’re truly passionate about investing as a hobby, don’t compromise other aspects of life just to satisfy the urge.
Seek Investment Advise
Some people are passionate about building LEGO megastructures. But even so, they still watch tutorials and other media for advice, inspiration, etc. The same should apply when investing as a hobby. You still want to make quality trades and positive returns despite being a hobby. So it makes no sense not to seek investment advice.
Fortunately, it seems there’s investment advice hiding around every corner. But, unfortunately, you have to be mindful of who you take advice from. As a general rule, always seek advice from experts with a proven track record who don’t hide it behind a paywall.
Invest What You Can Afford to Lose
Finally, similarly to a previous tip, investing only what you can afford to lose is key to making the hobby work. Nothing guarantees a winning investment, no matter how many investment books you’ve read, podcasts you’ve listened to, or early-retirement blogs you’re subscribed to.
So you must be comfortable with losing what you’re planning on investing. After all, we learn from our mistakes; the same logic applies to investing. That said, you must put yourself in the best possible position to ensure successful investments in your ventures. But even so, don’t risk your life savings just because you think investing is a viable hobby for you.
Investing as a hobby is possible and can be potentially rewarding. However, for beginners looking to try it, it’s a neverending sea of information, uncertainty, and risk. Despite that, we salute you for wanting to try investing as a hobby.
But approaching it with the right mindset is key. Therefore, educating yourself is of utmost urgency. We hope our seven tips will help you embark on this new and exciting journey and potentially help you accumulate financial wealth in your spare time.
A surprising number of people have started investing as a hobby. But just like any other hobby, you must learn certain things before trying it. Therefore, investing can be considered a hobby if you do it correctly.
Trading stocks is a perfectly acceptable hobby. However, whether stock trading is a good hobby depends on external factors unique to every investor. For example, you could make winning trades every now and then, but to achieve long-term success, you must adopt a more professional mindset.
Stock trading and other forms of investing as considered risky ventures with a high entry barrier. But as long as you do it correctly and adopt the right mindset, you can make a living off stock trading.