Purchasing stocks can feel intimidating and difficult. Especially now during all the commotion about the current financial climate and inflation.
This doesn’t have to be the case if you know some of the best tips and tricks concerning the stock market.
Setting goals is a crucial component of being a successful investor. Setting goals will give you something to work towards. Maybe you want to see enough returns to pay off your mortgage or buy that new boat. This helps you with setting up a timeframe of how long you are going to keep the shares and how much money you need to invest every month.
It is popular to purchase shares that are constantly being talked about. Surely you have had that one friend who keeps advising you to purchase shares in the same company over and over again. The company keeps showing up in news articles and analysts talk frequently about how they have never seen anything like a share price growth like this.
This is what I call a ticking bomb that will explode eventually. No stock goes up forever and the people holding onto their shares too long are going to lose a lot of money. For example, Gamestop shares had an impressive rally at the beginning of 2021, because investors got upset that hedge funds kept shorting the stock. However many investors jumped on the bandwagon too late and lost a fortune.
I explicitly avoid purchasing shares based on trends, because in my experience it all comes tumbling down very quickly once the demand to purchase shares slows down.
When investing there is no such thing as luck. When someone wins big most likely they have put a lot of time into analyzing charts, and past performance data or they know something other investors don’t know. Therefore it is better to have a more diversified portfolio when starting out.
Diversification minimizes the risk of a stock worsening the portfolio’s overall performance. It also improves your potential gains significantly. I suggest you buy shares in an index fund or Etf fund in the beginning, because they are already diversified. There is no need to analyze the stocks purchased by the fund you will purchase shares in.
Diversification is not just having at least ten different stocks in your portfolio. It is also owning stocks from different sectors, because if you own too many similar stocks they may go in the same direction most of the time. When they are tanking they all tank and when they are rising they all rise together.
I want to emphasize that this paragraph is the most important one of the entire blog post because trading is super dangerous. Avoid trading at all costs!
I don’t care about how many ads you have seen when a trader is talking about how much money he/she has made, how easy people proclaim trading to be, or the number of trading millionaires you see.
Trading is risky without several years of knowledge gained from investing, working for hedge funds, and being a stockbroker. It is not something to be undertaken lightly. The successful traders who you see have dedicated years of their life to getting to where they are now. However that wouldn’t be very good to have in a commercial or isn’t very interesting to talk about so they elect to display the results of years of hard work, and make you believe it only took six weeks.
Free stock picks are often just an illusion. When it comes to penny stocks this is almost always true, because of agendas not displayed to investors. The advocates are liars mostly trying to make as many people purchase worthless stock to drive up the price. When the price has reached a certain point the promoter will start dumping shares leaving investors with worthless shares while he or she just hit the jackpot.
Have you ever wondered why their time never costs anything? Most serious brokers or financial advisers send a bill for the amount of time they spent talking to you. However, these brokers never send you a bill and you never have to schedule a time to talk to them. The reason for this is that they want to lure you into a false sense of security and then all of a sudden break all their contact with you as soon as they have made their money.
Your friends are most likely not going to be doing well in the stock market, because those who are don’t have the time to sit around and talk with you. Their time is valuable and they don’t allocate time for everybody who wants a piece of advice. Only listen to your friends if they can show you proof that they are doing well with their investments. Otherwise, their picks are about as useful as an elephant in a minefield.