A short checklist of stock market investing tips and guidelines for beginners
Getting straight to the point, one can have profitable income from the stock marketplace by applying a few simple principles. One must respect experiences of millions of investors over countless stock market cycles that have distilled these principles. Even though the system is set to work in its own favor, hundreds of thousands of individuals make money successfully trading stocks or through NASDAQ. Contrary to popular belief one does not have to be a financial whiz or have a superior IQ to achieve this. In fact, according to financial experts the world over, everyone has the common sense to follow the stock markets; it needs only fifth-grade math to do it.
This piece brings you some Tips for Stock Market Investing
If you visit capital.com for some financial insights, you will be more surprised than disappointed. Human nature forces us to look for an easier way to riches and happiness. Having an investment strategy has more to do with common sense than relying on lady luck. Here are some powerful tools to aid investors and beginners boost their confidence with some ‘easy’ winnings. The key is of course time and the magic of compounding interest accrued. It is the best way to avoid risks and make money work for itself. You’ll generate wealth instead of putting together just a lump sum.
Here are several tips to follow for beginners
1.Setting Long-Term Goals Patiently
-What will decide your wealth in the long term? Three simple things:
-Net Annual Earnings
-Number of Investment Years
Those taking the plunge in the stock marketplace need to identify their financial needs. Timing is everything whether you are looking for short-term gains, quite a few years or retirement. Some people start early for future college expenses, to purchase a home, or to build an estate.
Set the purpose and period of needing funds clearly. Counting on stocks for short-term gains is more of luck because of volatile markets that do not promise adequate returns when you need funds.
2. Decide on Your Risk Tolerance
We are all subject to philosophy and psychology. Our education, income, and wealth contribute to our risk tolerance. The ability to feel varying degrees of anxiety is different for everyone and again depends on a number of factors like occupations, education hand geographical location. A risk is often taken akin to gambling for favorable or unfavorable outcomes.
Again, the perception of risk varies for different people. Only two kinds of people are fearless: one who is foolish and others who are actually courageous. Taking calculated risks is all about perception in investing. Experience teaches more about investing wisely. Experience also provides the base on which you can do future computations to minimize risks. Beginners may fear to purchase their first stock. However, they perceive stock investment less risky with experience of buying and selling, marketplace volatility and liquidating assets a few times.
Keep away from stocks that will cause you anxiety and sleepless nights. You will be prone to make the flighty decisions in the mornings.
3. Keeping Emotions Cool
If you are unable to control emotions, better to leave your portfolio and all financial decisions to your financial advisor. Consider this: “Short-term prices of companies reflect the combined emotions of the entire investment community.” See, what I mean? You may be aware of the terms ‘bear’ standing for negative and ‘bull’ representing positive marketplace swings.
It is better to rely on logic and a systematic analysis of the company’s assets, management, and prospects. Buy or sell decisions depend on prices moving in opposite directions, which creates a suspense atmosphere. Some hold on, some sell and some buy more. Timing your profits is another psychological game of happiness or regrets. Investors prone to thoughts flooding their minds constantly see an early burnout.
Develop an exit strategy when you buy securities and execute your strategy unemotionally.
4. Keep Basics in Mind before taking any decisions
Here are a few basics you cannot afford to ignore:
Financial Metrics and Definitions - P/E ratio, earnings per share (EPS), return on equity (ROE), and compound annual growth rate (CAGR) is necessary to compare different companies
Popular Methods of Stock Selection and Timing - Understand “fundamental” and “technical” analyses to apply in your stock market strategy
Stock Market Order Types - Be aware of investor stock types such as market orders, limit order, stop market orders, stop limit orders, trailing stop loss orders
Different Types of Investment Accounts - Cash accounts and margin accounts form all major trades. Know the rules for each.