When it comes to investing in the stock market, there are several tips you should keep in mind. This is regardless if you’re a complete beginner or an experienced trader. These tips, in no particular order include:
Research Stocks & Their Volatility
It doesn’t matter if you’re new to investing or you’re a seasoned vet, you always need to research stocks you’re thinking about buying. When you’re evaluating stocks, take a look at the company’s latest financial standings. You want to invest in companies that have a good financial track record. Also, companies should be well managed because if a company has a very high turnover rate (in regards to executives) and the company isn’t financially healthy, then it’s probably best not to invest in their stock.
Take a look at companies’ stocks over the last year or two. A quick look at any chart will reveal just how volatile stocks have been. Take a hard look at a company’s stock to determine if there are more periods of volatility than patterns of stability.
How volatile a stock should be is all about preference. If you plan on being a high risk investor, then by all means invest in stocks that are volatile. If you’re a more conservative investor or you don’t want a high chance of losing your money, then stick with stocks that have not been that volatile these last 12 months.
Invest In Stable Companies For Long-Term Gains
It’s a good idea to invest in stable companies or companies that are not going anywhere anytime soon. This includes leading brands and big name businesses such as Amazon, Bank of America and Apple to name a few. Such companies are household names and they have been around for a very longtime.
Investing in stable companies won’t likely result in fast gains. It’s more of a long-term strategy. Such companies’ stocks can be expensive, which is why you’ll want to gradually invest.
Furthermore, pay attention to the charts. When big name companies’ stocks start to drop, that is usually when you want to buy shares. The chances are the stock prices will go back up eventually. Although you’ll lose money initially, you’ll have the opportunity to gain it back and then-some by buying more shares when the stock prices are down.
Diversify Your Portfolio
An important tip is to diversify your portfolio. The stock market is unpredictable and if you have all your money in one stock, then you could lose it all if something goes wrong. All it takes is one world event or event in your country for the stock market to crash. By diversifying your stock portfolio, you’ll reduce your risk.
Some investors hold stock in different companies in different industries. There’s investors who hold stock in companies located in different countries. It’s up to you how you diversify. As a general rule of thumb, consider holding at least 3-4 stocks.
Buy Low, Sell High
This tip is commonsense but so many people don’t actually follow it. The aim of the game is to buy stocks when they are low and then sell them when their prices increase. However, the big mistake people make is not selling at all when the stock increases. Instead, they hold onto it because they think the stock will continue to rise.
Holding onto stocks as they increase in price is fine if you plan on holding it for the long-term. If you’re looking to make profits regularly, then always buy low and sell high.
Pay Attention To The News
The news affects the stock market, both in good ways and bad ways. Pay attention to what’s going on in the world and within the industry of the companies you’re investing in. If you invest in a company that is located in an area where civil unrest is happening or will likely happen, then it might be a good time to pull out your money or invest more if stocks tumble.
Check regularly to see if companies you’re invested in are making the news. For example, if you have stock in an international gym chain, then see if they have been in the news recently. If this chain is about to open more gyms in the future, the stock price might go up. On the other hand, if you learn via the news that the chain has hit hard times and might close hundreds of locations, then this is a bad sign.
The bottom line is keeping up to date with the news can indicate how the stock market will go. In turn, you can make better trading decisions.
Be In Control Of Your Emotions
One of the quickest ways to fail hard in the stock market is to not be in control of your emotions. All experienced traders will say the same thing. It is important to always be in control of your emotions. This has always been good advice and will continue to be relevant for the foreseeable future.
In the short-term, stock prices reflect how investors are feeling. A good example of this is when there is a massive stock selloff when in reality there shouldn’t be. When there’s a large number of investors that become worried about the companies they are invested in, then the price of those companies’ stocks are likely to drop.
If you feel emotional while trading, then take a step back and take the day off. Only trade when you are in complete control of how you’re feeling. Before you even buy a specific stock, you should have some sort of reason why you’re buying it and have a long-term plan for it. Not only that, but you should have an exit strategy before you purchase anything.
A few of the above tips might seem like commonsense stuff. However, they are still relevant and will continue to be relevant going into 2022. If you want to become a successful trader in the stock market or improve as a trader, then implement the above advice.