As a beginner-level investor, you may have many questions going into the world of investing. How do I research where to invest? How do stocks make money? Where do I begin?
Here are a few tips to help you get started in investing.
#1 Investing for the Long Run, Not the Short Term.
First thing’s first: What are you trying to achieve? Before you begin investing, you want to set some goals. One of the most popular suggestions you may hear as you start out is to plan for the long run and not to focus on short-term successes. If you go into investing expecting a get-rich-quick result, you may be disappointed. But, with enough time and planning, you can achieve some substantial long-term goals.
By creating these long-term goals, your short-term ones will define themselves. If you need the money you plan on investing back in a year or two, you might consider avoiding the stock market.
Research will be your new best friend. Research fills in the holes your lack of experience creates. Spend some time researching how to achieve your long-term goals, stocks you may want to invest in (and the companies behind them), and the logistics of how to take the actions you’re planning to take.
The investing world is bigger than stocks. Look into other options such as IRAs, mutual funds, and CDs to see which fit with your investment style.
#3 Creating a Strategy Before You Invest.
Now you need to apply the knowledge you gained through your research. This is how you will create your investment strategy. After careful research, you should now have a better idea of what you need to do to reach your goals.
In creating your strategy, ask yourself what kind of investor you’ll be. How high of a risk are you willing to take on, and for what amount of investment? How long do you plan on holding onto the stocks you purchase? Should you hold onto one stock longer than another?
Your strategy is your game plan. You want to stick to this strategy as much as you can unless you find it’s not helping you move toward your goals. If you gain experience that tells you the direction you’re going isn’t the right one, change direction. But, don’t act on a gut feeling or make decisions based on your emotions.
#4 How to Find the Right Stocks.
This is an extension of your research, but it’s important enough to mention again. Research stocks before you buy them. Research companies before you invest in them. Some beginning investors make the mistake of buying based on the stock’s performance alone. This can be a great way to waste money.
Be sure you go into investing in stocks with a clear head and a good idea of what to look for. There are as many risks as there are rewards in investing in stocks. But, if you do your homework and play the game intelligently, you will increase your chances of achieving your goals.