Beginner’s Guide to investing on the stock market

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It’s essential, as a beginner, that you learn everything about investing on the stock market. This post will guide you on how to go about it. Make sure you read carefully, so you don’t miss out on any useful information.

1. You need to start small and learn in the process.

Do not be scared when testing the water; that’s an excellent way to start. How do you learn how to drive a car? You will have to drive the vehicle first. To become a doctor, you’ll have to attend medical school. When investing on the stock market, the same thing applies.

2. Put some of your cash on safe-mode

Regardless of the type of investment you are into, you may lose lots of money or make lots of money. Thus, you must keep some of your cash in a safe investment (like a certificate of deposit & savings).

3. Ensure you monitor your investments at all times

One of your responsibilities as an investor is to keep track of your investment. 

Whether you have an investment in the stock market, real estate, a company, or any other investment type, you need to keep close eye on any investment you make.

Investing on the stock market

4. Your investment should not be based on what others are doing, but your goal.

The fact that most people invest in a particular thing doesn’t mean it is a must you invest there. You may have a different investment goal. If your goals are defined, but you lack the knowledge of how to achieve it, then a great place to begin is at Betterment.

5. Ensure you are always prepared (even for worse events)

Not all your investments will yield fruits, never make that assumption. Do not assume that your investment will yield returns because you have done the necessary research and have weighed both potential rewards and risk.

The fact about investment is that most of them do not promise returns except for some insurances or investments like a certificate of deposits, annuities, and similar types.

If investments yield return at all times for investors, then everybody on the planet would be put their cash into different investments. There is no promise or guarantee. Therefore, you have to prepare yourself to gain money or lose money. Everybody loves to win; nobody wants to lose.

In reality, your investments can stay flat or go either way (profit or loss). Many people will make an effort to predict possible outcomes; these predictions are nothing more but guessed work.

6. Keep emotions aside

When investing, do not mix it with emotions. Ensure your investments are logical and not emotional. Let’s go through the 2008 Great Recession. The stock market recorded a loss of -36.55%. That year, lots of individuals pulled their investment out of the market. The next year (2009), the stock market grew by 25.94%, and most people still tied their investments to safer places in that year.

I hope you get what I mean? I am trying to say that a lot of people can develop emotions if something terrible happens. That’s human emotion, and it is natural. But it would be best if you did not allow your feelings to get in your way when you are investing on the stock market.

Do not forget that being logical and not attaching emotions to your investment will benefit you more. What goes down must come up, keep that in mind; the fall (2008) and rise (2009) of the stock market is a perfect illustration.

Diversify Investments stock market

7. Diversify

I am sure you are conversant with the statement, “Do not put all your eggs in one basket.” This statement simplifies the idea of diversifying. The same rule applies when investing on the stock market; do not put all your cash in a particular investment or company. You are allowed to diversify your investments; you can invest in real estate, stocks, business, etc.

Diversification has its benefits. First, it spreads the risks associated with your investments. Secondly, your investments must be diversified between non-liquid and liquid investments, so you will know the time to pull some or all of your investment out from the market. Thirdly, diversification is essential because you may have different purposes for your investments, like funds for your children’s college education, retirement, etc. Thus, some investments may stay longer in the market, and you may have to pull out some early. The idea here is that you have several needs that need to be attended to in different timeframes. You will not be able to satisfy these needs if you have just one investment.

Diversification offers value. One of your investments may go south, others may yield fruits or stay flat, which can help you recover. No sector is wholly protected from risks. Every industry and investment type has its risks, and diversifying your investments can help spread these risks.

8. Be flexible

Do not set your investment goal to stone. What you are experiencing now may be different from what you will experience in 5 or 10 years. Therefore, your investment goals should be flexible. Have at the back of your mind that what you are experiencing can change tomorrow. You may be single, but you may be a family person five years from now. Thus, you must modify your investment decisions or goals.

Also, have in mind that some of the investments you make may or may not align with your goals in the end. In the event of such, make sure you are open to changes or modifications in your investment strategies. After recognizing such changes, spend time learning other alternative investments that are suitable for you and will be perfect substitutes for the investment you are into currently.

9. Learn from the mistakes you make

The best way to learn and keep moving forward is to learn from your mistakes. Doing this can help minimize investment risks, and it also helps improve your knowledge. 

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