How to Get Started in the Stock Market
Before getting started in the stock market, the first thing that you should do is to be clear that this is exactly that you want to do. Each and every individual has their own financial goals in life. So, analyze yourself, your life and come up with your own financial goals. As you must be aware of, stock markets are considered a risky investment. At the same time, the right investment in stocks can give you high returns like no other investment can! On the other hand, investments in a bank or gold, are comparatively much safer, yet, they may not give high returns as the stock market. So, keep all these things in mind and then take a firm decision, whether investing in stock is what you really want to. If yes, move on to the following tips…
Investing in the Stock Market
Whenever you want to do something new in life, you should be well prepared for it in advance. The same thing applies to your entry into the stock market. Learn the basics first. Know what are the various financial terms used in lieu of the markets as well as their meaning. Internet is a vast resource for all such financial and stock market related nuances. So, go to any financial site and upgrade your knowledge.
The next thing that you should do is to start studying how the stock markets work, how the various stocks are doing and how they have been faring for the last two-three years. Since the economic slowdown, various kinds of shares have seen a sea change in their value. Industries and sectors which were considered safe investments a few years ago, are no longer so. The economic scenario has completely changed and so has the functioning of various scrips in the stock market. So, read as much as possible and gain as much insight as you can into the workings of the stocks as well as the market. If you can get your hands on individual stocks ratings, how they fared in a particular quarter, in a year, etc., it is even better! These days, there are many courses and seminars which are planned to teach new investors all the basics and workings of the stock market. So, if you can somehow manage to attend these, they will really add on to your knowledge.
The biggest mistake that beginners make is to invest in stocks that are highly risky, but promise huge returns. The main reason behind this is that everyone wants to become a millionaire in a short time, through the markets. This is in fact a wrong strategy for a beginner. Initially, the main goal of any investor should be to consolidate his position. For this, he should invest in stocks which he can hold for a long term i.e. anywhere between three to five years. Initially, a stock investor should ideally build a conservative portfolio.
Diversification – that’s another thing that all stock market investors should aim for. Never ever put all your eggs in the same basket. Always invest in a variety of stocks in a variety of sectors in a variety of industries. This will ensure that even if the price of one stock falls or an industry suffers a setback, the losses made from the same, can be covered with gains from the other stocks that you hold. There is one more very important thing that all new stock market investors should do. They should study the changes in the individual stocks and review them on a daily basis, not only the ones they hold, but also the ones they plan to invest in. If daily reviewing of stocks is not possible for a beginner investor, he should invest in a mutual fund account instead.
Choosing a stock broker is an important part of investing in a stock market. There are mainly two types of brokers, namely, full service brokers or discount brokers. Full service brokers guide an investor on the stocks and industries he should invest in, besides making the investments on his part. On the other hand, a discount broker only invests in stocks that the investor asks him to. He does not offer any recommendations on the kind of investments to make. So, choose a stock broker carefully depending upon your requirements and suitability.
With these tips you should now be able to find your way through it. However, as is said that you cannot learn everything in a day and you cannot be always right. So, have patience and take things slow as it might take you months and a whole lot of practice, before you are able to make independent, sound investment decisions in the stock market. All the best!