The world of stocks can be incredibly intimidating to newcomers, plain and simple.
However, everyone has to start somewhere right?
That’s the beauty of the stock market: from the start, the playing field is totally level. From master investors to those who can’t tell a future from a mutual fund, the stock market presents the same levels of risk and reward for everyone.
New investors need to know exactly what they’re getting into before they spend a dime on a trade or resources to get started. Below we’ve outlined seven critical tips for those starting out with the stock market. Consider them “must-do’s” and keep them in the back of your mind as you take yourself out of “beginner” territory.
Simply put, you need to prepare yourself for a long-term journey instead of a cash-grab scheme. In other words, you will lose money and you will get frustrated. By accepting the hardships beforehand, you’re much long less likely to get frustrated and maintain totally realistic expectations.
Seeing is Believing
As you begin looking for tools and resources to help you, bear in mind that having a visual representation of your stocks’ performance is paramount. Regularly checking out financial charts, for example, should become second nature for any investor.
As a side note, make sure to keep an eye on stock market resources that can keep you in the loop and let you know at a moment’s notice how the market is changing. So many people are visual learners and therefore need a painted picture of how their stocks are doing.
Diversification is Key
You’ll quickly find yourself disappointed if you treat every other investment as “the big one.” Diversifying your portfolio is an absolutely must-do and will keep you from falling into the trap of endlessly chasing a single stock that doesn’t pay dividends. Considering looking into CDs, securities and money market investments which are the closest to a “sure thing” as you’re going to find as someone looking to get a return on their investments.
“Risk” is Everything
Knowing the definition of “risk” like the back of your hand can help you avoid potentially costly decisions and ultimately keep yourself in check throughout your stock market journey. In short, risk measures the level of uncertainty versus what you’re willing to spend in an investment in pursuit of a positive ROI. Always acknowledging risk keeps you from wasting anything other than your discretionary income and will likewise keep your expectations grounded.
Don’t Get Greedy
It may not feel like it right now, but there will be that day when you’re riding high off of a smart investment. Don’t let that feeling overtake you. It’s only natural to want to get greedy when a stock seems on fire; however, staying the course and following the numbers versus your gut will often be the right decision.
All Advice Comes with a Grain of Salt
Nobody knows everything about the conditions of the stock market: it doesn’t matter how much experience or knowledge they might have. In a piece of classic investing advice from Warren Buffett, wealth doesn’t always equate to market knowledge. Always follow those with proven track records with the markets instead of someone who’s eager to flaunt their wealth.
If you’re feeling totally bogged down by trading advice, don’t fret. While there are plenty of variables when it comes to the stock marketing, sticking to these tips will certainly set you up for success versus trying to fly blindly.