Stock Market Advice for Novice Investors
Stock market has always been an alluring prospect of making money for a lot of investors. Over the years, an increasing number of people have started to look at the stock market favorably, with the hope of earning a handsome return. However, due to ignorance on investing wisely in the stock market, some have had to suffer major financial losses.
Investing in stock market can be a good way of making money in the long-term if one is armed with the right knowledge and expertise. So, before you take the financial plunge into the stock market, take a look at the following important points.
· Too Many Cooks May Spoil the Broth: While there are numerous ‘experts’ on TV, and on the internet, who will advise you whether you should buy or sell a stock, you should avoid making a decision in a haste. Although these experts have years of experience behind them, the fact of the matter is that nobody can predict the proceedings of the stock market accurately. What they provide you with is the possibility of a stock going up, or tanking in future. A lot of beginners panic when they see that an expert on TV has a bearish opinion on the stock they have just bought. Instead of selling that stock on impulse, you should wait and watch, so that the prospect of making a profit is open.
· Earn Your Wings: Stock market investing is also known as trading – if you were to trade in a physical commodity, you would definitely want to know about the features of the commodity before buying/selling it. You would even do a bit of research on its price trends, and whether it will increase or decrease in future. While trading in stocks, you should do a similar kind of research before putting your money into the market. Although internet has made it relatively easy to trade in stocks with a click of the mouse, the adage of knowing what you are investing in applies irrevocably to stock market trading. The best advice one can give to any novice investor is to prepare well and take calculated risks while trading in stocks.
· Don’t Put All Your Eggs in One Basket:Novice investors often make the mistake of buying shares from one, or a couple of sectors. This puts their investments in a risk as the probability of one particular sector going down drastically is much higher than a bearish impact across all sectors. Also, when an investor puts his money in numerous sectors such as banking, IT, power, automobiles, pharmacy, etc., the risk is more spread out. Out of these sectors, if say pharmacy stock takes the beating, other sector stocks can save the day for the investor. Therefore, for risk mitigation, beginners are always advised to consider investing across different sectors.
· Remember it is investing and not gambling:So John, who lives next door, managed to buy a brand new car, and the word is out that the down payment came through the substantial gains he made from the stock market. So in order to Keep up with the Joneses, you embark on your mission to make a quick buck out of the stock market so that you can buy an even bigger car. This is where most of beginners make a mistake. While there is a plethora of rags-to-riches stories on the internet, stock market should be best viewed as a financial institution which can provide a better rate of interest than conventional modes of investing such as banks. Investing to pay off your debts or to tend to your impulsive urges might work once for you if you are really lucky, but over a period of time, it will do more damage to your financial interests.
These were some tips that every amateur investor should look at before putting his money in the stock market. With the right knowledge and guidance, it is possible to use the volatility of the stock market to one’s advantage.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.