Investing in stocks isn’t hard. What’s challenging is knowing how to beat the stock market continually. Unfortunately, that’s something most investors can’t do.
The stock market has offered both experienced and newbie investors impressive returns. These rewards are not without risks. Investors who benefit from trading stocks are the ones that research the market qualitatively before investing their funds.
All investment comes with its risks. Moreover, the stock market can be very volatile if you aren’t familiar with its volatility and trends. We recommend that you research the history of the market, paying close attention to market crashes and corrections, as well as events linked to the technology boom/bust, taper tantrum, and the financial crisis that occurred back in 2008.
Top 5 Stock Trading Tips
1. Open an investment account with a brokerage firm you can trust
A brokerage account allows you to trade stocks and manage your money. Each brokerage firm has its set own set of advantages and disadvantages. This is why we recommend working with a brokerage firm that works best for you.
Many service providers are out there right now, the most common being discount brokers and full-service brokers. While a full-service broker evaluates your financial situation and offers advice to help their clients make informed transactions, a discount broker is more of a hands-off platform, and it is great for investors who actively invest in securities frequently.
2. Beginners should stick to low-risk trades.
If you are trading on your own and you don’t fully understand the market, we recommend staying away from (at least initially) high-risk stocks and high-risk trades in general. Low-risk trades involving the purchase of stocks tend to be less risky (game stock being an exception – read our article (here) on what was going on with game stock and silvers). When starting, stick to household names, brands that you love, see in your home, and are familiar with.
Generally speaking, stocks of consumer staples companies or utilities are usually low-risk stocks. These companies are known to have lower volatility, and they also produce simple goods that we all use.
3. Don’t let emotions cloud your decisions.
Before delving into this market, check your emotions. Your ability to succeed in trading stocks doesn’t always correlate with your IQ, but your EQ most of the time. Understand what type of buyer you are and manage it. Make sure that you’re controlling your temperament and the urges that could get you into financial trouble. Check your emotions at the door.
4. Only invest funds you can do without for a long time.
Can you afford to lose that money you are about to invest? If you can’t, then you shouldn’t be investing it in the first place. Simply put, don’t invest funds you can’t afford to lose. That’s straightforward enough, but investors let emotions take control when money is involved.
An ideal way for newbie investors to determine how much they can safely invest is to set up a budget. Determine how much money you’ll need to spend daily and how much of it is left for you to invest.
5. When buying stocks, stick with companies and not ticker symbols.
Stock picking shouldn’t be an abstract concept. We are talking about the real economy. Buying a share of any company’s stock makes you a part of that entire business. You want to invest in companies bringing out new products, innovation, and above-average growth in their sector.
Before you invest in a company, it is advised to understand its operations, long-term growth prospects, and competitors, to name a few. Investing in the stock market can be thrilling. It is also an essential part of building wealth.