Far too many people are still sitting on the sidelines and are hesitant about investing in the stock market. Because of their strong aversion to risk and the fear of loss, they are watching opportunities pass them by. The stock market can seem intimidating for the new investor and for those who have had a bad experience in the past; but it needn’t be. Here are a few tips as you consider investing:
Set yourself clear goals
Before you put any money down at all, set yourself clear goals. These may include funding your children’s education, making a down payment on your new home or saving for your retirement. The best way to navigate the investment environment is to have set goals in place and a clear plan on how to achieve them. If you have set yourself clear goals, your focus will largely be on accomplishing them and your plan will provide you with direction on how best to invest your money. Investing is a journey towards achieving your goals.
Build your knowledge
One of the best investments you can make in yourself is to take the time and trouble to improve your knowledge of investing. There is a plethora of information and research by professional analysts and experts, which will be a good guide. Investment seminars are also available that can develop you and point you in the right direction. Resolve to take some time to educate yourself. You will be surprised to see how much you can learn in a year.
How much risk can you take?
How much risk can you endure without staying awake at night? Sometimes you do need nerves of steel to sit tight when the market dips sharply. It is important to be aware of your attitude to risk and that stock market investing comes with risk. Stock market investments are not guaranteed. This means that although you are likely to make money over the long term, you can lose your investment.
If you can’t bear to take much risk and would be devastated by any loss, it is best for you to put only a small portion of your investible funds in the stock market and the balance in money market investments.
Invest for the long term
How much money can you really afford to put away for say five years and beyond? When you think of investing in the stock market, adopt a long-term strategy rather than looking to make a quick profit. Avoid investing more than you can comfortably afford to be without during your time horizon. Historically, stocks have generally outperformed other investment classes over the long term. However, in the short term, the market can be unpredictable and carry a greater risk of loss.
Diversify
“Don’t put all your eggs in one basket!” Don’t put all your money in one stock and don’t invest in stocks alone. When it comes to buying shares, diversification is essential. Instead of investing all your money in just one or two companies, its best to diversify by buying shares in different companies and sectors.
Get professional Help
Most of us do not have the time or expertise to make sound investment choices without the help of a professional. Professionals have the expertise and an enormous amount of information with which they can make well-informed decisions and guide you appropriately.
Don’t jump on the bandwagon
When you make an investment, you should know your reasons for doing so. Relying upon every rumour or tit bit from your friend or neighbour is tantamount to gambling.
Invest regularly
Allocate a part of your investments in a systematic investment plan. Instead of trying to time the market, invest on a regular basis say monthly, or quarterly in an appropriate vehicle, and even when your finances are stretched.
Invest in Mutual Funds
If you are new to investing or don’t have that much money to invest, a mutual fund may be the most convenient way to invest. A mutual fund pools investor’s funds and manages them in stocks, bonds, money market instruments, etc. The benefits of mutual fund ownership include the wide variety of investment types to choose from, having a diversified portfolio of stocks, bonds and cash, and having access to professional management, usually the prerogative of substantial investors.
Buy low-sell high
This seems so obvious but many investors often do the exact opposite! They jump on the bandwagon and invest when the market is already rallying. Once it reverses, they panic and sell. If anything, this should be considered an opportunity to invest in strong companies at bargain prices. A market decline is not the time to panic and sell, but rather to take advantage of the lower prices.
Be realistic about your expectations of the stock market. If you set reasonable long-term profit expectations for your investments, you will be more accepting of the inevitable periods of volatility. If you stay the course and continue to build upon the foundations of a sound investment strategy, you can come closer to your financial goals. Depending upon your particular circumstance, your age and time frame and your overall financial plan, do consider putting at least some portion of your money in the capital market; it still offers the best prospect of real long term growth.
Source http://234next.com/
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