Oct 26, 2020 11:51 AM EDT
7 essential stock investments tips for beginners
How good are you with "emotion management" when it comes to money?
Can you go to bed at night knowing your $1000 investment could dip into $500 by the time you wake up in the morning?
If so, then you're made for stock investment. Otherwise, you may want to look elsewhere for ways to make money.
Stock market investment has long been an allure for investors looking to make big money.
However, making money in equities is not easy.
It requires loads of research and a solid understanding of the market and a great deal of patience and discipline, among others. Not to forget, the market is also one of the most volatile in the financial industry.
But that's not to discourage you from tapping into the riches of the stock market.
In fact, we've compiled a few tips to help you paddle your stock market investment boat.
Avoid investing in public stocks
At all costs, you should avoid investing in stocks based on your friends, colleagues, or family's recommendations. More often than not, these types of stocks backfire in the long run.
The world's greatest investor Warren Buffett was surely not wrong when he said, "Be fearful when others are greedy, and be greedy when others are fearful!"
If at all, you feel tempted to follow the public's opinion, you should at least conduct your own research and convince yourself of your decision before moving ahead.
Make your stock picks based on research
Strangely, many people still invest in stocks based on the "name of a company."
No need to say this is a very wrong way of doing things.
Remember: Buying a share of a company's stock makes you a part-owner of that business.
So, if you're going to become a part of a business, the least you could do is find out about its operations, how it currently ranks in the industry, its competitors, its long-term prospects, and what the future looks like for it.
However, if you don't have the time to do this research, you can subscribe to the Motley Fool Stock Advisor program, which is a simple program that offers stock picks to members. They do all the heavy lifting and recommend valuable stock picks to members. With their stock picks, you have a guarantee of investing in stocks that are more than likely to outperform the market.
To learn more about this program, you can read the complete Motley Fool review here!
Invest in something you understand
If you have a solid understanding of the tech industry, please make sure your portfolio is channeled towards tech businesses. If yours is agro, invest in agro stocks only.
The biggest mistake any stock investor could make is investing in a business or industry they know little about.
If at all you're tempted to invest in a business you have no idea about, be sure to acquaint yourself with the ins and outs of the industry before picking out stocks.
Always monitor your investment
Don't just invest in a stock and take a three-year break from it because someone told you stocks take five to ten years to yield reasonable dividends. From time to time, you need to check your stocks to see how they're performing because we live in a highly volatile global community, where business and financial markets are constantly suffering fluctuations.
It's only when you monitor your stocks rigorously that you'll find out whether a stock that's currently suffering a dip has no chance of coming back alive anytime soon.
Never let emotions cloud your judgment.
Many investors have lost money in stock markets, many are losing right now, and many more will lose because of their inability to control emotions, particularly fear and greed. In a bull market, the lure of quick wealth is difficult to resist, which is why you need discipline, patience, and a clearly-defined goal.
Create a diversified portfolio
Different stocks will perform in different ways. But you can offset your losses with profits by diversifying your portfolio and investing in various assets.
If, for example, you invest in two businesses and one is currently experiencing a dip while the other is on the up, your profits from the latter can offset your losses from the former, thereby keeping your net investment afloat.
Invest only money you can afford to lose
If you want to take a risk in a volatile market like this, then see whether you have surplus funds that you can afford to lose. You don't need to lose money in the present scenario. Your investments can give you huge gains too in the months to come. But since no one is a hundred percent sure, the safest thing to do is invest only the money you won't mind losing.
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