However, making money in stocks is not that easy especially for newbies and there is no sure-shot formula. It requires tons of discipline and patience. You need to gain sufficient knowledge before you leap into the fray. Do a great deal of research and have a sound understanding of the stock market industry before you seriously decide to invest in it.
Here are some fantastic tips, which if followed prudently, can give you a better grasp of how to deal with the stock market and increase your chances of good returns.
- Know your goal and purpose before investing in the stock market and the most likely time you may need the money in the future. Will you need it back in 6 months, a year, 5 years or even longer for your retirement plan or the college education of your kids? If your purpose is to get it only within a few months or years, then consider other types of investments. The volatile stock market can’t provide you the certainty that all your capital may be available within the short timeframe that you need it. It is recommended to invest in stocks for long-term goals, let’s say, more than 10 years.
- Do your homework, investigate and know the stock market by gathering as much information as you can. If you plan to invest on the stocks of a certain company, don’t be afraid to call the Investor Relation Department and ask about their product, income, earning and other related information or go to their website and look for the investor relations menu where you can download financial reports and other helpful information. Determine whether the company is in the top ten holding spots. You have to know what you are investing into since you will be owning a part of the company.
- Have realistic expectations and understand your risk profile. This market does not offer any guarantees that your stock values can readily go up or will bounce back after a decline. As a newbie, be ready to take some losses at 10% below of your purchase price. One of the ways of knowing your risk profile is by attending seminars on stock investing. Workshops usually give you guides on the recommended list of stocks to invest in.
- Have more patience and control in your investments. The stock market may have a lot of investment opportunities that are only favorable for a day and not so good on the next. Do not be attached to much with your investments.
- Reinvest your income, interests and dividends from your investments right back into the markets. Compounding is a very effective strategy that can take trivially sized investments into substantial portfolios over time.
- Spread out your investments to manage risks. If all of your money is allocated to one stock or even one sector of the market, a single downturn could wipe you out. Manage your money effectively and you won’t be as hurt by market dips.
Soruce: Pinoy Financial Planning
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