You recognize the value of investing and you’d like to build a stock portfolio. That’s about all you know about the stock market. As a beginner, you have a lot to learn, and while you could certainly hire a broker to guide you, there are quite a few things you should learn on your own so that you can at least understand what is happening. Here are some things to keep in mind as you begin exploring.
Understand the Nature of Investing
When you invest your money in the stock market, you’re taking serious, calculated risks with your money. There are large banks and corporations that consider investing to be a very competitive aspect of the business world. In short, investing is not something you can take lightly or consider a hobby. You need to look at every potential investment seriously, asking yourself whether it will make or lose money.
Measure Risks Carefully
A lot of research goes into choosing stock investments. You’ll want to maintain a humble attitude and review high risk investments carefully. Don’t jump on the bandwagon and invest in a brand new tech company just because one of the owners has a prestigious reputation. You’ll be surprised and sorry when that business tanks. High risk investments aren’t necessarily things you have to avoid altogether, but they should be weighted carefully. Never give more than a percentage or two if your working capital to a high risk investment. In short, never invest more than you can afford to lose.
Don’t Trade Too Frequently
A lot of beginners get nervous when they start investing and they buy and sell their shares too frequently. They might be listening to advice from television or they may have more experienced (albeit sometimes not always brilliant) investors telling them what to do. Buying and selling too frequently will only lose you money because your broker takes a fee every time you make a move. Set your own stop points and stick with them no matter what other people tell you to do.
Practice Makes Perfect
You’re going to read a ton of books and listen to a lot of guru information and you’ll definitely feel confused. Start by trading on paper – in short, practice trading without actually investing. You can do this on your own or you can play a stock market game to gauge your own judgment levels in terms of good choices, analyzing information, and when to buy and sell. Once your comfortable in your abilities, you can try your first real investment.
The stock market isn’t something to take lightly. It’s made a lot of people good money, but it’s also caused a lot more people to lose their hard earned cash because of bad decisions. Work it carefully and you could build a nice portfolio.