You may be thinking of taking your money and investing in a couple of the top stocks or with big brands and that’s it. Investing is so simple. No, you are on a clear path of losing money.
The best way to invest in stocks is by doing proper research and understanding the business of stock. Keep in mind that you will become the shareholder, so you should invest in the business, not in the stock.
Let’s discuss the top 5 things that you absolutely need to know about the stocks.
#1. Know What You Are Paying for
You may feel tempted to a broker’s adv. A stockbroker is a company that has access to the stock exchange, they provide you a platform to trade in stocks and charge money for that.
But before choosing a broker, you must know what benefits you will have and how much you will be paying to the broker. Compare demat account charges and what benefits they are providing.
You may be a newcomer and need a lot of advice and learning for better stock selection, or you may trust in your own research and look for a cheap broker where you don’t need any research advisory.
#2. Focus on Long Term
Always focus on long term, and avoid any shortcut. There’s no shortcut to success.
If you observe the richest persons in the world, they worked their ass off to taste that success.
You might get tempted towards scams that double your money in no time. Avoid double money schemes trap and chose growth-oriented options like mutual funds, or stocks if you have the understanding to read the stock market fluctuations.
If you don’t know much about stocks, then learn how to invest in stocks, rather than looking for quick options.
Don’t get panic when a market crash happens, and you have lost a big chunk of investment.
If you analyze the history of stock markets, stock markets crashed and rose again. Investors who sit tight and went through the course without selling their invested stocks, they earned exponential gains.
When you focus on the long term, sudden market dips shouldn’t bother you. The market always recovers from fall, it may take some time.
If your stock has gone to the bottom lows, despite the low price, avoid emotions overpower your research. Just stay calm and let things change themselves.
You will be a winner in the end.
#3. Stock Trading is Good
People think trading is not good, and you can end up losing a fortune. But that’s not absolutely true. You will lose if you don’t know how to analyze market trends and don’t know the trading strategies.
You should start learning trading to book short term profits along with your long term investments.
This will not only give you a better understanding of the stock market, but also give you some confidence when you successfully run a trading strategy.
You can start learning trading strategies and implement them to see if that works for you or not. You will end up learning something for sure.
Don’t focus on daily profit booking, rather think long term by becoming an expert in executing successful trading strategies that will help you become a proficient trader in the long run.
Having a balance of long term investment and intraday trading is a good strategy to avoid big losses and build up wealth in the long run.
#4. Stock Price is not the Metric
You can’t evaluate whether a stock is good to buy or not, by looking at the price of the stock. Buying a $100 stock may cost you too much if you have limited money to invest.
On the other hand, there’s no use buying 100 penny stocks of $1 which will ultimately become an investment waste.
Buy stock price on the basis of their business, management, and vision of company, not the price.
Sometimes, a cheaply priced stock with strong fundamentals, give you exceptional gains, rather than a premium stock that may fall from the peak due to any sudden event happening.
#5. Rebalance Your Portfolio
Invest more money into the shares (already in your portfolio) whose prices have dropped when the market crashes.
This can be a good opportunity to buy shares at cheaper prices. You will be able to buy more quantities of stocks by paying the same amount you invested earlier.
For example, if you have bought 10 stocks worth $1000, where each share’s price is $100, now if the market falls and price of share dips to $50, now you would have the opportunity to buy 20 more shares by paying the same $1000.
You can reap the exceptional gains when the market starts recovering.
You should know the purpose of your investments and select your stocks as per your investment goals.
The best way to protect your invested money is to invest in the longer term, take advantage of dividends, and above all find stocks with strong fundamentals.
If you do your research before investing and keep the above-discussed tips in mind, you will be able to earn more from the stocks without worrying about market volatility.