Investing in stocks can seem quite intimidating. Just picturing a stock trader by profession makes everyone think investing is more complicated than it really is.
But don’t let the image of a businessman in a fancy suit stand in the way of you learning what the stock market is all about. Although the media has portrayed stock trading as a stressful, risky way to handle money, the truth is anyone can start buying and selling various company shares. Even if you have zero investing experience.
There are risks involved, but there’s money to be made. Some win big after a successful investment; others lose money in a matter of seconds.
Investing comes with ups and downs. The sooner you begin investing though, the sooner you can start building your own portfolio.
What are stocks
You’re surely familiar with the term “stock” or “company share”. But before buying and selling stocks and the likes, it’s important to start learning the basics.
So, what are stocks and how do they “work”?
A stock is a financial instrument that represents a small part of a company. In simple words, when buying stocks, you’re basically buying into the ownership of a business.
While owning shares doesn’t mean you own the company, investing in stocks translates into investing in the future of a business. And the more stocks you purchase, the more you buy your way into access to the company’s profits.
Stocks allow companies to raise funds and grow the business. But having a piece of legal ownership in a company comes with risks and perks.
If business goes well, the price of their stocks goes up. If business is bad, the value of the shares you bought will melt quicker than an ice cream in July.
Stock trading tips for beginner investors
If you’re looking to diversify your portfolio, here are a few stock investing tips for beginners. Take your time to learn what stock trading is all about and start investing wisely as soon as you feel ready.
- Learn all you can about the stock market and company shares
Getting educated before jumping head first is the best way to start investing with your right foot forward.
There are plenty of stock market books you can read and learn about dividends, portfolios, risks and perks that characterize the stock market today. The internet is also a great source of information. Nowadays, there is no excuse for not taking advantage of free articles or podcasts.
If you’re looking to take investing serious, start learning all you can about stocks and the market. What are company shares, how to read charts, how to understand statistics and market reports are all part of learning how to invest.
- Start investing in safe stocks
A great way to dip your toe into the world of investing is to start with the “safe stocks” first. Although stock trading is never 100% safe, there are many different company shares you can start investing in as a beginner.
Companies with a great reputation are usually considered the safe way to go. Buying shares from big name brands is less risky for beginners. And aside from almost being safe, such stocks are the perfect way to slowly start learning how investing actually works.
- Plan it out
Learning about stocks and investing in “safe shares” is great! But you can’t start investing without a proper plan first!
How much can you afford to invest? Make a plan and start from there.
Since investing isn’t a way for you to get rich overnight, having a strategy in place should keep you safe from losing too much money.
A good way to start would be investing what you can afford to lose. If, for some reason, things start to go bad, at least you won’t be tempted to act out of panic.
- Learn about stock trading risks
Is losing money a scary thought? Then you’d better stay away from risky stocks!
Learning about how to invest in various company shares is a given. But you should also be aware of the risks that are involved. If a big brand name can offer you safe stocks to trade, other markets, such as the tech industry, represent a risky way to invest your money.
- Learn how to diversify your investments
Although, as a beginner, it may be tempting to invest in just one type of share, wanting to see “how investing works” implies diversifying your stock investments.
Investing in stocks implies both successes and failures. And keeping all your eggs in just one basket is never a good idea when it comes to your portfolio.
- Reinvest your earnings instead of cashing in
As a beginner who’s just learning how to invest in stocks, it may be tempting to cash in your earnings!
However, to make the most of the experience, reinvesting your cash surplus would be a great way to raise the value of your own portfolio.
- Study the companies you decide to invest in
Acting as if you owned the company has a different meaning here.
Although you can’t sit next to the company’s CEO and act like a boss, you can definitely study the financial statements, charts, statistics and try to understand the future of this business.
- Think long term when it comes to stocks
It’s not uncommon to earn fast when trading stocks. But beginner investors should probably aim to minimize the risks.
Investing should be done with your financial future in mind. Thinking long term and investing slowly is key to safely building a great portfolio in the long run.
- Start investing as soon as possible
Although it may sound counterproductive for a beginner, investing as early as possible is always wise!
You don’t need to start big and invest a lot of money at once. The sooner you start though, even if you start small, the sooner you can reap the benefits of the ever-growing stock market.
Although investing sounds quite complex, it’s a shame not to give it try. Start small, learn as much as you can and before long, you’ll see your nest egg and portfolio grow.
Adriana is a freelance writer, and her favorite hobby is writing about personal finance.
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