The stock market is one of the best places to invest one’s money, as evidenced by the returns that many investors have enjoyed over the years.
However, with great reward comes great risk. That’s why you need to enter the stock market with eyes wide open, knowing that you’re prepared for the ups and downs.
The 2008 financial crisis and the Great Depression are just two examples of how you can go to sleep with a fortune and wake up with a disaster.
However, if you play your cards right, then you can make incredible returns on your investment, year after year, no matter the conditions. After all, there are still people who are getting richer even during the COVID-19 crisis.
Here are some tips to help you get started as a first-time investor.
- Don't Trade More Than You Can Afford
This is a lesson that many forget when they see the potential returns offered by the stock market. But don’t be seduced by possibility and abandon all reason.
Make sure that you’re not investing money that could put you on the backfoot if you don’t get it back.
But, if you still have money left over after paying for your basic living expenses then you can easily invest knowing that you’re okay with losing it.
- Do Extensive Research
Don’t rely on advice from others alone.
Do your own research about the stocks that you’re interested in, the condition of the company behind them, and the people running it all.
This means that you’ll need to do a lot of reading and keep up with market activity every day in order to make informed and smart investment decisions. Research is often what sets successful investors apart from the rest.
- Open an Investment Account
As soon as the due diligence is done, you can go ahead and create an investment account with confidence. You should also consider opening a brokerage account so that you can buy and sell stocks freely.
Stock trading is made easier with the help of discount brokers and full-service brokers who will be at your beck and call whenever you need them.
Discount brokerages are usually more hands-off while full-service providers offer the full gamut of services that you need to invest smartly, including advising you on the best stocks for your portfolio based on your unique financial situation.
- Try Low-Risk Stocks First
When you’re starting out, it’s often better to begin with low-risk stocks first. This means sticking with larger companies that have been around for a long time and have a proven track record of success. Avoid penny stocks for now and rather opt for consumer staples companies as they will rarely let you down.
- Don’t Rush When Making Decisions
The stock market is always up and down, this is nothing new. But, if you watch the news you’d swear that market volatility is a novel idea.
It’s the job of pundits and reporters to seek out their own interests and this involves being as clickbaity as possible.
For best results, don’t get emotional when you see a negative headline in the news and you must never make hasty investment decisions. Stick to your strategy and understand that changes come and go.