Stock Market investing for Beginners
Investing in the stock market is the only way for most people to build real wealth. The right mix of investments helps you achieve almost any financial goal, and risks mitigate through planning, strategies and proper asset allocation. In this article we will try to convince you that investing and the stock market for beginners is not as scary and incomprehensible a process as it seems to many.
The market risks of investing are not as big as everyone thinks
The stock market for beginners, and beyond, does indeed contain risk. But losing money isn’t the biggest threat. A far greater danger is that people who do not have sufficient savings to retire run the risk of surviving savings (if any) and facing difficult financial lives. Those who stick to safe investments may lose purchasing power due to inflation. “Investing money seems risky, but leaving it is even more risky, especially if you study the question of the threat of inflation. If you don’t increase your money, then it’s difficult to live normally in the future, ”says certified financial officer Petr Lazarov, co-director of investments at Plancorp.
Investments can strengthen capital and maintain purchasing power. To reduce the risks of inflation, do not aim for high returns. Just use the right mix and distribution of stable and risky assets. This approach will ensure the growth of the portfolio without the danger of its complete depreciation.
Stock and bond markets are vast
Stocks and bonds are the main composition of the stock market. Buying stocks is more risky than buying bonds. However, some stocks are less risky than others.
There are large and stable corporations that have been on the market for several decades. Among them: Johnson & Johnson, Microsoft, Ford Motors, General Electric, Procter & Gamble and others. For beginners, it will be right to pay attention to such companies in order to feel like in a new business and to practice. However, a large and established brand does not always have the same profit potential as a new player. And here it is important to understand that the greater the potential return, the higher the risk. The task of a reasonable investor is not to miscalculate with the choice and correctly assess all the prospects for investing in the company. Bonds work in a similar way. High-risk companies offer high returns, while safe borrowers (usually state-owned companies) offer lower returns. If you are not good at what stocks are,
Use assets with different levels of return in your portfolio. Regardless of the situation, there is a mix of investments to suit your goals and risk tolerance. Combine high-risk, high-yield stocks with more stable, safe stocks or bonds. Don’t forget about companies that pay dividends.
The beginner stock market does not follow this rule. As stated above, you must deal with asset allocation (diversification). It’s about how you divide your money between different investments. How you mix investments determines the overall level of risk in the portfolio.
With the right combination, you can control the volatility (variability) of the portfolio to a certain extent. You also have control over the level of surrender. High risk portfolios contain a higher percentage of equities than bonds. Conservative portfolios include 50% stocks and 50% bonds, or give a larger percentage to bonds.
All stocks and bonds have a different risk / security ratio. To understand what combination of stocks and bonds and what proportion you should keep in your portfolio, determine your level of willingness to take risks.
A strategy against emotions
Buying and selling investments is one of the most important responsibilities of any investor. He should have his own system that will tell you when to buy and sell, and that will not allow you to panic and save yourself at the wrong time. In this regard, the stock market for beginners is no exception.
“Emotions will spoil you as an investor, whether you are a beginner, hobbyist or professional. Emotions will make you buy and sell in the stock market at the wrong time, ”says Matthew Tuttle. A well-planned strategy will simply remove variables such as fear or excitement from your equation of investment success.
Develop a calm attitude and a smart approach to investing. “It means you understand what you are going to buy and when. That means you know what you’re going to sell and when, ”says Tuttle.
You need not keep track of time, but manage it
Trying to do something right on time, people sometimes find themselves in a stupid position. And it doesn’t depend on whether you want to find the best time to enter or exit the market. The secret is that no one ever knows exactly what will happen and when.
“We have observed that people are reluctant to invest in and redistribute stocks. They are concerned that the risk scores are high, ”says Certified Financial Planner Jeff Nauta, director of Henrickson Nauta Wealth Advisors. The truth is that stock markets have been trading at their highest levels for years, and you are simply missing out on big profits while you sit anxiously on the sidelines.
Don’t wait for the right time. Instead, explore possible strategies and get down to business. Make it a goal to invest a certain percentage of your salary on a regular basis.
There are investors and there are traders. An investor invests money for a long-term (3-5 years) and stretches the strategy for a long time, receiving dividends and increasing capital evenly. The trader is engaged in speculation. He tries to profit from the fluctuations in the price of a stock throughout the day, making many trades, buying and selling stocks several times a day. Trading is a huge risk. And if you don’t want to spend all day watching quotes, then this is not your method.
We do not recommend considering the stock market as a game and an opportunity to make money quickly. Any kind of speculation is risky. They have nothing to do with the long term investment we are talking about.
“High-frequency short-range trading (ie the work of professional traders) has minimal impact on ordinary investors. If an investor does not buy massive blocks of securities, he does not remain in the red, ”says Jeff Nauta.
Scandals and scams erode public confidence in the stock market, but keeping the issue out and ignoring economic growth leaves ordinary people far behind in financial well-being.
“You can’t think of another way to turn $ 100,000 into $ 1,000,000 if you don’t have a really good printing press,” Tuttle notes with a smile.
1. Invest and keep an eye on inflation when choosing an asset to invest in.
2. Distribute money among different assets.
3. Diversify your portfolio based on your level of risk.
4. Turn off emotions and stick to a strategy.
5. Don’t wait for the right moment to invest. Accumulate a certain amount for investment and act. The main thing is that this is not the last money.
6. Invest long term.
stock market investing for beginners