What shouldn’t you do if you’re new to the stock market? We will tell you about the principles you should follow to save your money.
Those who try to understand the stock market on their own make the same mistakes in the beginning. To avoid this, we found out what should be done by those who invest quite recently or are just about to start their way in the stock market. Here are some basic tips for beginning investors.
Train your emotions
They are the enemy of any investor. Being able to resist impulsive decisions is at least 70% of success. Try not to look at the stock price every minute. If your investment idea doesn’t go according to plan and the stock price drops, calmly weigh the pros and cons first. Maybe that’s not a reason to throw everything away and run to sell at a loss. The price can then come back and continue to rise but without you. If you are a long-term investor, you need to be able to withstand falling prices over the long term.
Do not be an investor only on paper. Ask yourself: why did you come to the stock market? What is your main goal? Probably one of the answers will be to make money. That’s why you shouldn’t put off real investments for a long time. At first, you can get a demo portfolio for practice, but until you try trading on a real account you won’t really learn anything.
Forget about fabulous profits
Internet advertisements promising you hundreds and thousands of percent per annum are nonsense. In the heads of beginners may occur phrases like “this paper should grow by 50% by the New Year,” or “I’ll invest $5 thousand, and in a year I’ll be a millionaire. Newcomers invested money without really understanding what they were buying, and also at inflated prices. In all cases, it ended sadly – people lost money.
Be prepared for risk and loss
Especially if you still intend to get those same hundreds of percent returns. Do you want to earn a lot? No problem, the derivatives market provides such opportunities. But be prepared for the fact that potential losses will also be high. Risking one dollar and earning hundreds of thousands at the same time is a utopia. If you are lucky once, it is more likely to be a fluke, and it is unlikely to turn into a pattern.
If you’re not ready for big risks, choose more conservative securities. They won’t have a cosmic return, but the likelihood of making a big loss or losing money is several times lower. Take the level of risk that you can handle. You must clearly decide for yourself what losses you are ready to accept and move on if things have not gone according to plan.
Forget about robots and analysts
There is no magic pill. Neither are their universal trading methods. The market is not amenable to exact statistics, there are real people behind it. In each situation, you have to look for an individual solution. Do you know the difference between an experienced investor and an analyst? The former can not only find an interesting deal but is willing to take a real risk of losing his money. Analysts and robo-advisers are not responsible for their advice.
Whether you choose to be an investor or a trader, find your place in the market. In other words, don’t invest in everything. It’s not realistic to cover every financial instrument. Determine your goals and what you need to do. Think about what you know best, what instruments you are good at trading – and deal only with them.
Develop your own strategy
Develop your own vision of the market. Each person perceives the market differently. You can learn different ways and approaches from more experienced investors. But you shouldn’t copy someone else’s methodology completely, either. Nobody will be able to pass on 100 percent of their experience to you. You’re unlikely to succeed “exactly the same”. Therefore, you will have to make your own mistakes.
Think with your own head
Adhere only to your own opinion. You don’t have to follow the crowd. If everyone around keeps telling you that you should buy or sell, and you have a different opinion, then analyze the situation yourself once again. Who knows, maybe you are right? But trusting everyone’s opinion and following everyone blindly, you can find yourself in a situation where you’ll be biting your elbows and repeating: “Well I told you, I told you …”. And it will be too late.
But in moderation. It’s better not to buy one or two papers with all your money. Even if you think your investment idea is sure to be successful, you may still be wrong. The stock market is sometimes unpredictable. It’s better to buy five or seven securities you know about than 20 of something you don’t understand. It is also not a good idea to invest with borrowed funds – to take so-called leverage. There’s a good saying: take other people’s money, give away your own.
Be prepared for difficulties
You will have to work long and hard. If you think that, after taking some short courses, you will immediately begin to make a lot of money on the stock market, you are completely mistaken. You will have to constantly learn. One way or another, you need to keep track of what happens to your investments. Know where the business of the companies whose stock you own is headed. And generally staying up to date on news in sectors of the economy that are important to you. Investments in this regard are comparable with sports. Constant training is necessary. Through pain, loss, and disappointment. Investing is not easy.