You are ready to invest in the stock market. However, you don’t know where to start, and you feel lost in front of the many options which you have learned about on the Internet from the stock market masters.
The first thing to know is that there is a lot to learn from your own experience. Here are some of the most significant stock market tips.
The stock market is one of the oldest financial markets. It attracts many novice investors with the romantic appeal of expensive suits and fabulous money, shown in more than a dozen iconic films.
1. Practice before you start
To get off to a good start, you need to practice first. It is a mistake to believe that you already know everything or say: “I’ll figure it out.” Through books, seminars, or online training, you can quickly become familiar with the stock market. Learning is a big step. It takes an investment, but in the end, it will pay off.
2. Identify your needs
The second step is to determine what you want. It may seem daunting at first. But that’s okay for any beginner. The more time you spend thinking about your needs, the easier it will be to take the first step.
So ask yourself: “What is my income level? Do you want extra income or financial independence? Do you have loans to pay off? How much time per day/week/month will you invest in the stock market?” The answers to these questions will affect your investor profile and your strategy.
3. If you do not know which stocks are worth buying, prefer companies that you use in your daily life
It is a simple answer to that relevant question for all investors who have just come to the stock market.
Ask yourself: “What cellular operator do you use? In which bank do you keep the money? What company made your smartphone?” These are just the first of dozens of questions that relate to your life preferences, and it is the answers to them that will lead you to the right choice of stock to purchase.
4. Start your investment portfolio and diversify risks
The stock market provides stocks, bonds, savings certificates, investment certificates, options, futures contracts, forward contracts, swaps, and other derivatives trading.
Your task is not to give preference to only one type of securities but to create your portfolio of instruments that can compensate for each other’s drawdown. Thus, you will neutralize investment risks and will be able to receive a stable profit from your investments.
5. Start earning dividends
Dividends are periodic payments that companies pay to the holders of their shares. The more shares you have, the more profit you will get in cash. Dividend income usually depends on a percentage of the value of your shareholding.
There is a dividend payout calendar for every company offering its shares for free buy/sell. However, you do not need to own the stock for the entire period between payments. You can purchase the required number of shares immediately before the payment and sell right after to earn on dividend payments. To make a profit from the stock market this way is an excellent opportunity to study the functionality of the stock market.
6. Lock in profits when you reach your goal
Before purchasing any securities, make your investment plan. Answer your questions: what, how much, and for how long do I want to buy? What do I want to get in the end?
Such a plan will allow you to identify specific goals for specific trading instruments and begin to achieve them. The basic rule is to never deviate from the plan and lock in the profit/loss when you reach the permissible limits you have indicated.
This approach will allow you to independently control the size of your investment capital and reduce the chances of losing everything.
7. Do not panic with short-term drawdowns at the moment
If you decide to dive into the stock market and invest in one of its instruments for a period of 3 to 5 years, then we have great news for you — it is a wise decision. The securities market provides ideal opportunities for long-term investment due to many so-called “blue chips” — international companies, investing in which are considered the most reliable and profitable over a long period.
Remember: when deciding to invest in the long term, forget about momentary changes in quotes. Pay attention to the entire period of the company’s existence on the market and build on the general trend.
In conclusion, we would like to say that you do not need to be afraid to take risks, merely test many strategies and choose an investment/trading style that suits you. The more mistakes you make in the beginning, the more you can learn and avoid them in the future.
