When trading in stocks, there are a lot of things you need to know what to and what not to do. Here are 5 dos and don’ts of trading in stocks to help you out.
You know investing your money is common practice, but you’ve also heard stock market stories ending in both fortune and disaster.
The truth is that the stock market is always going to be volatile, but that doesn’t mean you can’t lower the risk of investing.
So how do you know you’re doing it right?
Use these 5 dos and don’t of trading in stocks to get you started.
- Do the Research on Trading in Stocks First
From the start, you’ll need to determine how much money you want to invest and what your overall, long-term goals are with investment.
You will also need to do research to determine the best investment platform for you. You’ll need to research individual financial advisors, brokers, or firms before making decisions on who to work with. And if you’re buying and selling stocks in individual companies, be sure you’re well informed before doing so.
You’ll find information about all these things on T.V., radio shows, in print publications, and sites online like www.investormint.com.
- Don’t Think You Can Time the Market
The market is bound to go through large fluctuations. And most of us are terrible at predicting swings and reacting well to them.
When we adjust our investments based on short term swings in stock value and overall market standing, we tend to end up buying high and selling low. This means losing money or decreasing our potential earnings.
Don’t try to be a day trader. Don’t try to predict market swings.
Your earnings will come from a well-developed investment portfolio.
So how do you develop a good portfolio?
- Do Diversify Your Investments
This isn’t quite as simple as owning many different stocks. More importantly, be sure you own many different types of investments and types of stocks.
Consider buying stocks from companies in different sectors of the market. Consider investing in index funds and fixed-income funds.
- Don’t Wait, Getting in Early Matters
If it’s not a good time to invest because of your current financial situation, then don’t force it right now. However, if you are able to invest now, do not put it off.
Don’t think that investing more money later on has the same potential for earnings as investments made today. Because of the effect of compound interest, investing less money now can actually be more profitable over time.
Consider starting with a smaller amount and investing more as you go. This way you can invest and continue saving money at the same time.
- Do Be Mindful of Fees
There are fees for just about any service you use when trading in stocks. And these fees will add up.
Make sure you’re aware of all brokerage fees and other charges. Otherwise, you may be shocked if something like 40% of the earnings on your investments are not going directly to you.
Being Smart with Your Finances
Investing and trading in stocks can be a great way to get the most from the money you have. Spending wisely and cutting costs can go a long way too.
Check out our blog to learn interesting ways to save money in everyday life.