One may find investing in stock market intimidating. But, there are lacs of people who buy and sell stocks on the stock exchanges regularly and they are very successful. If you apply simple principals, research well, and have ability to take risk, stock trading can be lucrative for you.
An intelligent mind is not the be all and end all of being a successful trader. Investing regularly, avoiding the unnecessary risk, looking for a long-term achievement can create significant assets for you. Here are some essential investment and stock market investment tips for you:
Know your purpose: Do you need money in less than a year or after say five years? Are you readying yourself financially for your retirement? Are you a student and need money for college fees? You need to know these answers. You must know your investment purpose and the time within which you would like to have your money. If you are looking for short term, you should invest elsewhere as stock market is volatile and may not fetch you money when you need it.
Don’t listen to too many people: Do not influence your decision by listening to your neighbor, relative, etc. If they are investing a certain stock, this doesn’t mean you should invest in the same stock.
Know your risk-taking ability: Some people are good risk takers while there are others who lose their sleep when their money is stuck somewhere. It is a psychological trait that can play with your anxiety. By knowing your risk tolerance, you can avoid anxious or too much risky investments.
Invest in something you understand: investing in a familiar industry is always better.
Be practical: Some people have lost big time due to their emotions. Inability to control one’s emotions can disrupt logical decisions. When the investors are worried about a company, its stock price of that company falls, and when they feel positive about the company, its stock price rises. Feeling negative about the market is called a “bear,” and feeling positive is called a “bull.” This constant fight between bulls and the bears keeps changing the price of the stocks. Most of the times short-term movements happen due to the rumors, speculations, in short – emotions. Have an unemotional strategy.
Don’t hold un-realistic expectations: You can hope for the best but don’t believe in unrealistic assumptions.
Learn basics: Learn the basics of the stock market before investing. Do a proper research of the company. Know the following:
- Definitions like P/E ratio, earnings per share (EPS), return on equity (ROE), and compound annual growth rate (CAGR) and how they are calculated.
- Methods of choosing the stock and its timing.
- Difference between market orders, stop market orders, stop limit orders, stop loss orders, etc.
- Different Investment Accounts like cash accounts, margin accounts, etc.
Diversify your portfolio: Never put too many eggs in one basket. This is one of the most important stock market tips. Smart investors always own stocks of different companies in different industries.