Investing in stocks is as delicate as walking on a tightrope—one small mistake and things could end badly. But what makes this rope walking worth the risk are the attractive, sometimes astounding, rewards you get if done properly. Apart from the obvious monetary gain, you’ll also feel a sense of power and satisfaction by being able to accurately predict stock values and make the most of them.
While investing in stocks often involves complex methodology, there are also easy routes – investment hacks, you might say. The 10 tips discussed below can help you kick-start your investment career and turn you into a successful speculator.
Keep It Simple But Not Simplistic
In the world of complex calculations, keeping things simple is a skill on its own. Weeding out the irrelevant and unpredictable data and focusing more on reliable stocks with a safety margin can be a simple yet smart way to invest.
But, where things can go really wrong is when you fail to consider the essential data in the name of being simple.
(Related – How to avoid stock trading impulses)
Set Foot On Familiar Ground
A great way for beginners to start their investment is by buying stocks that are familiar to them. While this may not be a great advice for long-term investors looking to buy large chunks of stock, it is a good way to start for rookies, especially given the high chance of successful returns.
- Shelve Unrealistic Expectations
Are you the entering the world of stock markets, day-dreaming about the millions you will earn overnight? Take a step back from those sorts of dreams. Unless you take a massive risk that pays off (which is unlikely), you aren’t going to be catapulted to great heights in the blink of an eye.
The moment you start placing your bets on luck, rather than calculation, is the moment you stop investing and enter a world of pure speculation. While investing in stocks does involve a good deal of speculation, don’t go overboard or you risk getting burned.
Spread Your Money Out
As a general rule of thumb for any investment, it is wise to diversify rather than dumping all your eggs in one basket. This holds true for stocks as well. By diversifying your investment, you can rest assured that even if one stock fails, chances are the others will keep your foundations from toppling.
Being unpredictable in nature, stock market investment can be a lot less erratic if you diversify your portfolio.
Don’t Just Trade Stocks, Own Them
Don’t treat stocks as just a set of names and numbers that you’re trading. Instead, act like you own them – analyse them deeply on a regular basis, frequently make minor predictions about their market graph, and gauge their competition. Changing your attitude towards stock trading will help you become more proficient at stock evaluation, eventually netting you better profits.
You Can’t Always Nail The Timing
Trying to get the perfect timing by frequently buying and selling stocks and figuring out a universal pattern will not work. If you’ve got that sort of idea, it’s better you drop it as soon as you can. Understand this – you can never perfectly nail the timing. Not every single time, in any case.
Research shows that people who try to make a quick buck by rapidly moving stock, aren’t really making any significant improvements in their success ratio.
Never Neglect Past Trends
It is very common to hear in the world of stock analysis that past trends do not guarantee success. While this is definitely true, it would be stupid to neglect past trends altogether. Analysing the past trends of a company can give you much better insight into the sort of investment decisions that you should make.
Attempt Long Term Investment
Long-term investments have a high success probability. Once you’re done with analysis and have arrived at a stock you’d like to invest in, it is a good idea to attempt making a long term investment. This way, you don’t have to bother about minor fluctuations in the market.
Even great companies can fail, and to not fail catastrophically yourself, diversified long-term investments can be a safe bet.
As a beginner, you don’t have to be a genius in financial matters, but it’s always good to know the basics of a balance sheet and other metrics used in the stock evaluation. By acquainting yourself with stock calculations, you take the first step towards widening your understanding of the stock market.
Don’t Bet On Rising Stocks
Keep this simple mantra in mind: buy stocks at low prices and sell them at a profit. Never try to buy a stock just because it is growing in price and you expect it to grow even more. Always take a look at the reasons for that stock’s rise – it may be a temporary fluctuation, or it could even be the result of some ‘creative’ bookkeeping.
When something is falling, there is always a great probability that it will rise. Those are the shares you should be grabbing and holding onto tightly. Never ever let your greed subsume the logical side of you since you will often encounter tempting stocks that can quickly turn into a waste of time and money.
One Bonus tip
11. Keep an eye on the economy and market condition
Always keep an eye on the economy and broader market condition. Socioeconomic and political atmosphere affect stocks in a big way.
Readers, are you following these good practices for stock investing? Are you keeping track of the recent market ups and downs? Share what you know with us!
Thanks for the helpful tips. It’s tempting to either get overwhelmed about investing and not get informed, or obsess about watching the market. This is a more balanced approach.
Jon @ Money Smart Guides says
I love the tip of don’t trade stock, own it. You are going to get much better returns as a buy and hold investor since you aren’t able to guess at which stocks will rise in value and when to sell. Plus, the costs associated with trading add up quickly.
I’ve bought and held for over 15 years now and have no complaints on my return.
Smart Investing says
Thanks for sharing your opinion on one of my favorite posts.