Diversify
Avoid placing all of your eggs in one basket. If you put all of your money into one or two stocks and those stocks fail, you have lost everything. If you choose to diversify, you will have stocks in many different areas to turn to. That will give you a more diverse portfolio that you can see gains from. You should also diversify your holdings. By investing your money in various sectors and investment vehicles, you limit the risk of losing money. It is wise to invest in a combination of stocks, bonds, and cash vehicles with the allocations varying depending on your age and your comfort level about risks.
Shop around
If you are investing in the stock market, be sure to shop around on the front and back load fees in addition to any other fees. Depending on the type of trading you plan to participate in, fees can eat away quickly at your at your earnings. Compare the rates of many investment companies before making your decision.
What do you want?
Before you decide how much you want to invest in the stock market, take some time to figure out what you want your investments to do for you. Are you looking forward to building a retirement fund? Are you looking to make some extra income? Once you get that figured out, you will be able to decide how much you are willing to risk on the market.
Do your research
Do not blindly follow the recommendations of your investment broker without doing some due diligence of your own. Ensure that the investment is registered with the SEC and find some background information that shows how the investment has performed in the past. There have been instances of fraud whereby the info presented by the broker was fabricated.
Have an objective
Keep your adjective and time horizon in mind when choosing your stocks. If you have many years left and are saving for a retirement decades away, invest aggressively. Look at small cap growth stocks or related mutual funds. The percentage of your portfolio in the stock market should be as high as 80% if this is your personal situation.
Education
Having a good education is important when it comes to the stock market. Investors who understand basic accounting principles are much more likely to have success with trading. This does not mean you have to get an accounting degree. You just need to know the basic scoring system of how the stock market works, such as annual reports and stock history.
Terms
Learn to invest in the long-term, as well as in the short term. When you invest in stock, you should have a pretty good idea of how long it will take for the stock to gain value. A short term investment should be made if you notice a trend. However, you should make a long-term investment if you know a particular company has a good chance at beating its competitors in the next year or so.
Jason Butler
Jason Butler is an Atlanta native, as well as businessman, blogger and teacher. Not only is Jason a prolific flipper, marketer, writer and side hustler his number of years in higher education and student support have given him expert knowledge in understanding the economics of the student loan industry.
Having an objective or goal is very important and can keep you from making a big mistake is trading. Case in point. …my husband and I invested with the goal of purchasing dividend paying stocks and interest paying bonds. We set parameters for financial strength, safety and minimum rate of return. Back in 2008 we were in Alaska for a month….off the grid with no way to do any trading when the market had a huge correction. We held on to all of our investments and the dividends and interest just kept right on coming into our account. While our net worth went down – on paper – our income didn’t decrease at all. And today, all of those investments are back to what they were before the “crash”. We have a buy and hold strategy but do sell occasionally when the investment no longer fits within those parameters we set.
Thanks JASON for giving us this informative article. These are such helpful tips for me. Good points especially the one ‘Do your research’. It’s so very true. Thanks and keep posting like this.