For most individuals, being financially independent is a big challenge. As per the best financial experts, one must be totally independent financially after reaching the age of 40. If you are looking to invest in stock market shares, you need to follow certain tips.
Unhealthy financial practices and emotional spending must be done away with. The below stated tips are must to know for every newbie in the stock market. By being smart and tactful, a lot many investors are making money through this general finance medium.
There are many people who simply rely on luck when they invest in shares and blame the destiny for losing money. But this is not so. Investors make some grave mistakes due to which they lose money.
The person who invests without having any plan in the mind is sure to fail. Prior to investing, know your goals and try to invest on a long term basis. Think deeply whether you are saving for the retirement, to buy a home or just for meeting educational expenses of your children. The stock market is highly volatile and thus it is not wise to set short term investment goals. If you need your investment back in a few months, the stock market is not for you. Always keep in mind that the growth of your investment portfolio is reliant on the invested capital, the annual earning on the capital and the time period you can allot.
2. Get to know about your own risk tolerance. Although the psychological trait is based upon the genetic factors, it is influenced by income, home background and education. Check out the degree of anxiety you experience after making an investment. If you lack risk tolerance, the stock market is again not meant for you. By knowing the risk tolerance, you can avoid the investments that make you very anxious.
3. Always make logical decisions when it comes to buying and selling of stocks. If you are known for making rash decisions, you will lose a lot of money in the stock market. Learn how to control your emotions and try to have a balanced mindset.
The person feeling negative about the market is addressed as ‘bear’ and the one who is positive about the stocks of a company is termed as ‘bull’. The price of the securities keeps changing due to the anxiety of bulls and bears. So, when you purchase the stock, find out the reasons why you want to buy. It is mandatory to check out if the buying decision is guided by anxiety. Impulsive buying has no place in the stock exchange market.
4. If you have never made an investment in the market, learn about the basics. Get to know about stock market terms, metrics, techniques of stock selection and timings, the order types and various kinds of investment accounts.
Apart from the mentioned tips, there are various other golden rules to follow. Smart investors tend to diversity their investment portfolio to minimize the risk. You can buy the stocks of different companies rather than choosing anyone.