Investing in the stock market is fairly easy and rewarding yet is considered risky. Such risk drives several people away from the stock market and denying themselves a really good opportunity to earn some really good gains in just a short period of time.
Becoming successful in the stock market (be it trading or investing) isn’t that hard but there is a price to pay. Knowledge is the key in getting into the stock market. The reason why a lot of people fail in the stock market is because they either have little or lack knowledge about it. In other words, they don’t know what they are doing. Thus before investing in the stock market, be sure to learn even just the basics of being a successful investor. It requires time, effort, and even some money to acquire the knowledge needed. If you’re willing to pay the price you’ll reduce the risk and you’ll increase your chances of gaining. After all, you are investing and not gambling. Great things in life are never free and how great it is has its corresponding price. Are you ready to start paying the price of knowledge to become a successful investor? Read on.
In my experience as a stock trader and investor, there are fairly simple yet very effective principles that I follow to come up with winning decisions. Such principles were able to give me at least 10% gains on days even if the overall trend of the market is not doing well to as high as 36% in a single day. However, I also experienced losing as much as 10% in a day when I was still starting and realized that the difference between gaining and losing is coming from my decision making such as what stock to buy, when to buy and when to sell, and my interpretation of a particular stock. My decisions are influenced by my knowledge. My lack of knowledge leads to unstable emotions which leads to coming up with the wrong decisions.
There are just a few things to consider in acquiring the necessary knowledge to invest in the stock market. It’s easy to follow yet isn’t that easy to do. However, be mindful of how lucrative the stock market is thus just think of it as the steep price that you are going to pay in order to earn a lot. The good thing? All you need to spend is effort and not that much of money. Save your money for the investing and put on all of your effort in learning. Here are some tips of investing in the stock market.
1.) Learn the basics. Learn from the start such as learning what the stock market is, how it works, why is it essential in nation building, how does it affect the economy, etc. Though these won’t affect your investing decisions, it is very important to know what you’re getting into. A step by step learning is very ideal because this will lead you to the right topics such as the different kinds of stocks, dividends, etc. Learning the basics will let you know where to start and if you start right, you’ll end right, and you’ll acquire all the knowledge that you need.
2.) Different kinds of analysis. There are two kinds of analysis in the stock market: technical analysis and fundamental analysis. Technical analysis deals with the price action of a particular stock while fundamental analysis gives an insight of how healthy a particular stock is. Though some traders and investors give bias to one analysis, it is ideal to use both and make them work hand in hand. In the simplest sense, technical analysis gives you an idea of right entries and exits while fundamental analysis will give you an idea of which stocks has the best potential of growth.
3.) Practice. Investing is never a game. The money that you might lose might be lost forever thus before getting into the real thing, it is very important to practice first. There are several stock trading games out there that you can play. These games give you a virtual cash to trade or invest in the stock market. Playing these games will give you the experience of how it is really is in reality. Familiarity is very important because it sometimes spells the difference between being successful or failure in the stock market. Just think of it as going to war. Soldiers never go to war without training. Training equips them with the necessary knowledge and skills to survive and win the war. It is the same in the investing field. You must be equipped before engaging and putting your money in it. Remember that knowledge with experience could make you rich.
4.) Control your emotions. This is one thing that most traders and investors overlook. Emotions play a vital role in investing and in a field such as the stock market, it should be controlled or else it will make decisions for you. Price fluctuations give different emotional swings and it makes several investors forget and deviate from their plans. Result? More often than not, failure. Controlling your emotions is very important because if not, it will control you. Having entry and exit plans, setting goals, and sticking to your trading principles are very important because if you defined those well, it will make you control your emotions. You can never control the direction of the wind but you can control your sails. That is how you should approach the market. You can never control or predict the price action but you can control your decisions. Invest and decide with knowledge and logic, not emotions.
5.) Be updated. The stock market is very volatile. A very good stock today can turn into one of the worst tomorrow thus you should stay updated all the time. Read financial reports such as income statements, financial statements, debt reports, financial plans, etc. These determines the fundamentals of a company and these dictates whether the stock is a good one or a bad one. Spending an hour a day reading a business paper or browsing the internet for news is more than enough. If you do your homework diligently, rest assured you can come up with sound decisions and pick the right stocks.
6.) Go for blue chip companies. Short term price fluctuations never matter much to investors, what matters more is the fundamental and potential of a company. Blue chip companies are very stable companies and these are the ones that most likely would stay in the years to come, even decades. Since you really won’t mind the fluctuations, blue chip companies appreciate in time (normally in years) and these are the safest stocks to invest in. As what experts and experienced traders say, you can never put down a good stock. Blue chip companies are here to stay.
It doesn’t need a rocket scientist or to have a PhD in economics to successfully invest in the stock market. All you need is the right knowledge, a strategic plan, and working it out to be successful. It is never easy because it will take time and effort but once you acquired the basic knowledge, everything will start to go easy. It will become a part of you and analyzing and picking stocks will just be as easy as picking mangoes. Invest and exert some effort on the essentials and pay the price because the reward for the right decisions and actions are very great.