Who doesn’t like making money? And what’s a better way to earn profits than to sit at home and make money. I assume there cannot be a better option to make money. However, investing in the share market comes with its own sets of risks.
While you can make profits without doing much, you can very likely incur losses as well. Therefore, you need to have a sound knowledge of the stock market. Apart from that, if you have access to services like FiOS Internet plans and a smartphone, you can operate from almost anywhere in the world.
However, here are a couple of tips that you should remember.
Say NO to the Herd Mentality
Consider it a rule or whatever you want to refer to it as but DO NOT invest in a stock in which everyone around you is. You are responsible for your own decisions. You will be managing your own portfolio. No one will come and do it for you. Therefore, if you think that your acquaintances or friends are investing in a stock and you should too. You are wrong. Stay away from the herd mentality. Because this strategy would backfire in the long run. As Warren Buffet, one of the greatest investors in the world suggested that a person should be fearful when he sees that others are greedy and vice versa.
Take an Informed Decision
It is very important to take an informed decision when it comes to the share market. You will be in for a surprise if you ignore this suggestion. Because you will have to incur a lot of losses. By informed decision, it means that you should do thorough research before you decide to invest. You cannot just wake up one day and decide that this is the stock that you want to buy and gain profit from. It is much more than just having money and randomly deciding to invest it in stock. If you do not have a Finance background, you will have to carry out extra research regarding the stock market and how it operates. You might have to take advice from experts as well.
Invest in a Business that YOU Understand
Another essential part of investing in the stock market involves your knowledge regarding a particular business. You should never invest in the stocks of a business that you know nothing about. Because then you won’t be able to predict how the prices of the stock that you have invested in change according to the events that take place in the country or the world at large. In case you really want to invest in a company’s stock but you have little knowledge about it, educate yourself. Get to know about the operations of the company in depth. Spend some time learning about it before investing.
DO NOT Time the Market
Because you can’t. And you shouldn’t even try to. World’s most renowned investor, Warren Buffet, does not try to time the market either. In fact, the financial advisors warn the investors to avoid this behavior in particular. But they do otherwise and end up losing a large chunk of their investment. It is a myth in the world of finance that you can catch the tops and bottoms. Well clearly, you can’t. And if you try to, you are at the losing end of it. Even history has it that investors who have tried to adopt such behavior have ended up losing more money than they made.
Know Your Investing Style
Before you begin investing, you should be aware of your investing style as well. Because there are several ways in which you can make an investment in the stock market. You should know what is your style, in particular. There are two categories when it comes to the types of investors in the stock market:
- Ones who want others (stockbrokers) to handle or manage the stocks for them.
- Ones who choose the stocks for themselves as they please. And make the investment decisions themselves as well. No one manages it for them.
Once you are clear as to what type of investor you are, you are ready to proceed.
A Disciplined Investment
You should follow a disciplined investment approach. This will keep you grounded. Something that is very important when you are making an investment in the stock market. History has it that even the greatest of bull runs have shown moments of panic at some point or the other. Investors ended up losing money as a result of such volatilities in the market. Despite the great bull runs. Therefore, it becomes important for investors to move forward systematically under such circumstances. In the past, investors displayed patience and did not take aggressive decisions following the chaos in the market, ended up earning outstanding returns on their investment. Therefore, follow a disciplined investment approach and keep a broad picture in mind.
No Room for Emotions
If you want to be an investor, emotions do not have any place in the decisions that you make. Because you will only end up taking the worst of decisions if you let your emotions cloud your judgment. The two most prevalent emotions that exist among investors in the stock market are fear and greed. Especially when there is a bull market, the lure of making wealth as quickly as possible is hard to resist. Under such circumstances, investors take aggressive decisions. Sell the shares that are earning them huge profits only to invest in the shares of companies that they have little knowledge about. Hence, burning their fingers in the process. On the other hand, in a bear market, investors end up selling their shares on the lowest prices. This does not bring them any good. Therefore, it is essential to have control over your emotions. Think from the brain and not the heart.
Create a Diverse Portfolio
It is important to invest in a diverse portfolio. Because if you invest in the same industry, if one company suffers, so will the others. And you won’t have a way out. Because you did not invest in the shares of companies from various sectors. Diversifying the portfolio reduces your risk of loss. Therefore, it is always a good decision to invest in the stocks of companies that belong to different sectors.
Realistic Expectations
You should always have realistic expectations form your investment and the shares that you have invested in. You won’t earn money overnight. I am not saying that you should not have good or positive hopes from the investment that you make. But that does not imply that you have unrealistic expectations. There is a thin line between the two and you need to understand the difference. Because having too high an expectation will only hurt you.
Monitor
The world is a global village. You should understand the fact that any event (major or minor) happening anywhere in the world has an impact on the financial markets. Therefore, it is very important that you monitor the events that are taking place across the globe. You should also keep a check on your portfolio and how it is being affected by the changes taking place in the world. And if need be, you should change your portfolio accordingly as well. If you think that you do not have the time to keep a track of your portfolio and make changes to it, you can take the help of a financial planner as well.
If you act according to the above-mentioned advises, you can be a successful investor. Or at least try to be one. To educate yourself more, you can even opt for finance related channels on your Frontier TV packages or the like. Those channels are very helpful and they guide you in a very good way. You will acquire a lot of knowledge from the experts on those channels.
