Our today’s post is specifically designed on Share market tips for beginners.
In this post, you will learn stock market tips that will assist investors cultivate the temperament needed for long term success.
Investor must plan ahead and stay prepared for panicky times
In this post, here are several tips and tricks that will surely help you plan your investment.
Buying stock isn’t a big deal. What’s challenging is to choose the right company to pool your hard earned money.
If you’re on hunt for the stock tips, then I must say you are landed at the right place.
So without much ado, let’s get started!
Let’s begin with a few useful tips that should be followed by the beginner’s investor
Tips for Stock Market Investing
1. Set Long Term Goals
Before pooling your hard earned money you should know your purpose for investing.
If you are saving for the purpose of retirement, for future, to purchase a home
An investor should understand that how much you should invest and what will be the likely rate of return
Investor can make use of financial calculators which are made available online
Ideally, investor should start investing as soon as possible, save as much as you can and receive the highest return possible consistent with your risk philosophy
2. Understand your Risk Tolerance
Investor’s Risk appetite is how you feel about the risk and degree of anxiety when the risk is present
Risk tolerance is also affected by one’s perception of the risk.
For example, flying in an airplane or riding in a car would have been perceived as very risky in the early 1900s, but less so today as flight and automobile travel are common occurrences. Conversely, most people today would feel that riding a horse might be dangerous with a good chance of falling or being bucked off because few people are around horses.
As an investor you must be well familiar with the risk tolerance, you can avoid those which are likely to make you more anxious
Anxiety stimulates the fear which triggers emotional responses rather than logical responses.
It is to be noted that” During the period of uncertainty, the investor who can retain a cool head and follows an analytical decision process invariable comes out ahead
3. Diversify your Investments
Experienced investors must perform the required research, identify and quantify the risk.
The popular way to minimize the risk is to diversify your exposure.
Do not put all your eggs in one basket. Those who are said to be prudent investors own stocks of different companies, different industries, with the expectation that a single bad event will not affect of their holdings or will otherwise affect to different degrees.
Imagine owning stocks in five different companies, each of which you expect to continually grow profits. Unfortunately, circumstances change. At the end of the year, you might have two companies (A & B) that have performed well so their stocks are up 25% each. The stock of two other companies (C & D) in a different industry are up 10% each, while the fifth company’s (E) assets were liquidated to pay off a massive lawsuit.
Diversification allows you to recover from the losses of your total investment (20% of your portfolio)
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4. Avoid leverage
Leverage means the use of borrowed money to execute your market strategy.
In a margin account, banks and brokerage firms can loan you money to buy stocks, usually 50% of the purchase value.
In other words, if you wanted to buy 100 shares of a stock trading at $100 for a total cost of $10,000, your brokerage firm could loan you $5,000 to complete the purchase.
The use of borrowed money levers or exaggerates the result of price movement.
5. Handles Basics First
Have you heard about the famous phrase that says “An investment in knowledge pays the best interest”
Learn the basics about the stock market an investor must be well equipped about the stock market trends.
“An investment in knowledge pays the best interest.”
Yes, risk comes from not knowing what you are doing
The areas in which you are required to be well versed before pooling your hard earned money is –
- Financial Metrics and Definitions. Understand the definitions of metrics such as the P/E ratio, earnings per share (EPS), return on equity (ROE), and compound annual growth rate (CAGR). Knowing how they are calculated and having the ability to compare different companies using these metrics and others is critical.
- Popular Methods of Stock Selection and Timing. You should understand how “fundamental” and “technical” analysesare performed, how they differ, and where each is best suited in a stock market strategy.
- Stock Market Order Types. Know the difference between market orders, limit order, stop market orders, stop limit orders, trailing stop loss orders, and other types commonly used by investors.
- Different Types of Investment Accounts. While cash accounts are the most common, margin accounts are required by regulations for certain kinds of trades. You should understand how margin is calculated and the difference between initial and maintenance margin requirements.
6. Follow a Disciplined investment
The investors who invest their money systematically, in the appropriate shares and held on to their investment patiently have been witnessed outstanding returns.
Hence, it is prudent for investors to have patience and follow a disciplined investment approach besides keeping a long term broad picture in mind.
7. Have Realistic Expectation
Dear friends, there is nothing wrong with hoping the best from your investment but you could be heading for troubles if you set unrealistic expectation from your investment.’
However, it does not means you should be reluctant to high returns as stocks market are subject to market risk and are tend to be a roller coaster ride for the investor.
Play safe and have realistic approach toward investment
8. Monitor Rigorously
Any important event happening in any part of the word has an impact on our financial markets. Hence, investors needs to constantly monitor the portfolio.
If you can’t keep a watch on your investments due to time crunch or lack of knowledge, then you should take help of the good financial planner or someone who is capable of doing that
If you can’t even do that then stock investing is not for you. Better pour your money in less risk and secure investment.
It is aptly stated that “The individual investor should act consistently as an investor and not as a speculator.” –
There is a recession, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.”
9. Do not let emotions cloud your judgment
Many investors lost a lot of money in the stock as they have no control on their emotions. In a bull market, the Temptation of quick wealth is difficult to resist. Yes, greed augments when investors’ hear stories of fabulous returns.
This lead them to speculate, buy shares of unknown companies without understanding the risk involved
10. Avoid Herd Mentality
Investors should not get influenced by the others. While investing it is important to be well informed, do the necessary research, study and analysis before making any investment decision
Have you heard about that famous saying that says-“An investment in knowledge pays the best interest.” –
When it comes to investing nothing will pay off than educating yourself.
Perform the necessary research, study and analysis before making any investment decision
Conclusion
The world of investment is overwhelming, intimidating and uncertain. One must also consult the help of experts what are their opinion on the topic of investing.
Markets are subject to change, good investing advice is timeless
I hope this share trading tips is handy for you.
Final Thoughts
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