Four of the Best Stock Tips for First Time Investors
You’re thinking of investing in the stock market, but all of the information online and advice from professionals has led you to confusion. While it is a risky business, particularly for first timers, it can be a profitable endeavour if you do things right. To get you started, here are a few useful tips:
- Don’t invest your emergency funds
You might remember the episode of Friends where Monica is desperate for money and puts what little she has in the stock market on a whim, which leads her to losing it all and being forced to accept an awful job. Putting your emergency money for bills, food, and rent into stocks could similarly mean you won’t have it available when you need it. Keep those emergency funds in the bank and not in your stock accounts.
- Invest in companies that will be around for a while.
How to Invest says that some of the best stock tips are to think long term and that means picking individual companies which are doing well financially and are expected to continue to do so for five or even ten years in the future. Of course, it is not always possible to predict how technology and other changes will affect businesses. Nobody could have predicted even five years ago that streaming services would decimate the home video market. But thinking ahead will make it somewhat easier and help you pick the most profitable stocks.
- Don’t dive into anything you don’t understand
This should be advice for anything you do in life. You don’t need an MBA to use the stock market but you should have an understanding of the basics as a bare minimum. If you can learn more from a reliable source such as Investopedia, which has a useful tutorial on stock market basics, then this will help you too. Don’t do what Monica did in Friends and dive in without thinking (Monica didn’t even know what the stock exchange was called!) and don’t let an advisor talk you into something you’re unsure about.
- Move on when you have to
If one of your stocks is dropping or there are changes in the company’s field, for instance, what is happening with the fast food industry, then withdraw your money before the stocks plummet too much. If you decide that the stock game isn’t for you, it is ok to take what you have and get out before you cause yourself undue stress or financial loss.
This should hopefully give you a basic idea of some of the traps you can fall into when you’re new to the stock market and how you can avoid them. There are many more technicalities to learn about the stock market before you put your money into it but that is all part of the journey. Tread carefully, get useful advice from a trusted source, and do a risk assessment before you make a move. Once you start learning how to profit from stocks then you could be set for life!
You can find more such stock tips & trends on Money Bhaskar.