Stock market tips for beginners
As a beginner and most probably a small investor, you need some sort of stock market tips to help you glide through the stock market. Stock markets lure investors into making big but not everyone could make it. The prime reason being, lack of experience and guidance. So, to better equip you, we are giving some very useful stock market tips that will help you be a successful stock market investor..
Set your goals and objectives:
Before you invest in the stock market, you must establish your objective. Why are you going to invest in the stock market? What do you want to achieve and how do you plan to accomplish your objective? Your goals will determine your decisions and it will affect your performance in the stock market.
The right time to enter:
Our stock tips start with making your debut in this market. What is the right time to do that? Is it when the stocks are falling and the prices are low? Yes, common sense would dictate so and it is not entirely untrue. But you should study the stock you are willing to invest in. Has it hit the rock bottom? Do not buy any stock that is falling. Sometimes the company is suffering due to some bad decisions by the management. So, do your research before taking the plunge.
Time to leave:
Our second stock advice is about the time to leave the stock market. There could be personal or economic reasons that vary from person to person. Do not keep on incurring losses. Sometimes investors stick to their stocks despite losses in the hope that they will rebound. This rebound may or may not happen so instead of aggravating your loss you may want to sell those stocks and purchase something that is more likely to bring profits.
Fundamentals of stock trading:
You should learn and understand the basics of trading in stocks. These basics can be divided into the following five parts;
Setup: It is the reason why you are investing in a stock. It is a chart pattern that is highly likely to work. You should learn to recognize your setups and monitor their progress to see how good they are performing.
Strategy: To run and manage a setup you need a strategy. Each setup comes with its strategy. You should employ one according to the particular nature and type of setup.
Entry: The entry can make all the difference. You can get a definite edge when you make the right entry and the right time.
Exit: With entry, it is equally important that you master the exit strategy. When is the right time to call off the deal and leave? How do you plan to exit? These should all be part of your stock market exit strategy.
Profit: When you make a profit where would you take it and how will you manage it? These are all valid questions that you should have an answer for beforehand.
Timing the market:
A common mistake that many investors do and you should avoid is waiting for the ‘right’ time to enter or exit the market. There cannot be perfect timing for any of these and you cannot be one hundred percent accurate. Your time inside the stock market counts more than your timing to enter or leave the market.
Consider options other than stocks:
stock market is a place where people come to buy and sell in companies’ stocks. But there are other options too, where you can try your luck. There are bonds, treasury bills, and mutual funds. Amongst these, mutual funds are a safe and viable investment option. They are not that risky and the returns are very reasonable too. So, try these as well.
How much to invest?
Another important one among the stock market tips is how much to invest in it? As a beginner, anyone would tell you to start withsmall capital. You can also start investing a fixed amount every month. That way you will know the dynamics of the stock market and your loss if any would be bearable too.
Another thing that you can try before you invest in a stock market is paper trading. It is a technique where you do not buy or sell stocks. You just note down a paper about the number of stocks you want to buy and their value. Then you monitor their performance and see how they fare. You record the profit and loss to know how far you have succeeded in your estimates or predictions. In this way, you learn without actually making a loss. So, it is a good stock market advisory.
What to buy?
In the world of stocks, look for a company with a strong standing, that is paying well to its stockholders and is going strong in its business operations. You can start buying stocks of such companies and if they give you benefit, you may invest more in them. It is prudent to invest further in something that is giving you good returns.
Cheap is not always good:
You will get a lot of stock recommendations that are very cheap. Such cheap stocks are called penny stocks. Don’t fall for them. We are not writing them off altogether but they are cheap for a reason. Do proper research before you invest in any penny stocks, else you may suffer a heavy loss.
Take advice only from experts:
Many people will try to impress you with their free stock market advisory. They will claim to be the ultimate guru of the stock market and give you stock advice. Such pseudo-experts have the potential to ruin you.We recommend you take advice only from people who are experts.
Avoid new stocks:
New companies may offer a lot of growth potential. Their businesses might sound fancy and new. Who knows, they will achieve their potential or even outgrow their estimates. But you need to be careful, and our stock future tips to you is that you stick to tried and tested stocks only. Once you have settled in, you can try such new companies and technology start-ups.
Learn to decipher news :
There is a bombardment of information and news in today’s world. However, as an investor, you need to differentiate between news and non-news items. Often, the media will be blaring out stories about a non-event or something that has already happened. Separate wheat from the chaff and take what’s relevant and important for you and base your economic and investment decision on that.
Don’t always go with the flow:
Among the stock tips, another important one is that do not buy anything that everyone else is buying. This often overvalues the stock and that over-valued stock is like a bubble that will burst sooner or later. The Dotcom companies in the late 90s were one such bubble which busted with a bang and many investors lost their fortune.
Beware of confirmation bias:
Confirmation bias can be your worse enemy in the stock exchange. It will give you the wrong stock recommendation and incorrect stock options tips. So do not fall in the trap of confirmation bias and base your investing and business decisions on rational reasons backed by empirical data.
Know the company:
Do not buy stocks of those companies whose nature of business is not much known or you can’t predict how good or bad they are going to perform in the next 6 or 12 months. These could be technology-based start-ups or something to that effect. You won’t be able to understand their dynamics and make future predictions about their growth prospects.
You should decide beforehand whether you want to be a short or long-term stock market investor. Our advice and recommendation are that you aim for long term investing. It will be rewarding for you as you will earn periodic dividends on your stocks and the value of your investment will keep on increasing too. In times of boom sometimes the value of stocks reaches unimaginable highs, giving you huge monetary benefits.
Any stock options tips would tell you that you should diversify your investment portfolio. It means do not rely on one company or one sector. Invest in a variety of companies and sectors. This safeguards your investment and offsets the loss in one sector through profit in another.
Passive vs active investing:
These are two different approaches to investing in the stock market. Let’s discuss them;
Passive investing: It means investing in the index fund that tracks the entire stock market or index. Or you can invest via a stockbroker who will invest on your behalf. Your portfolio will be diversified across different companies and different sectors. You will have a fair chance of enjoying gains from a wide spectrum of companies and sectors.
Active investing: It is just the opposite of passive investing. Here you pick the companies and the sectors and weigh stock options. You will have a lot of stock recommendations to choose from. Since you take all the decisions so their success and failure rest with you and you have to take the ultimate responsibility of your decisions.
Verdict: Now the question is which one is better? There is no definite answer to it. You can choose either of the two. If you gave time, knowledge, and expertise you can be an active investor or you can be a passive investor if you lack the time and resources. You can also try a combo of both.
Patience is the name of the game:
The stock market is tricky. It is volatile and things can start to go wrong in a matter of a few hours. It is usually the first sector that gets affected due to political disturbances, bad economic management, wrong decision making, and trending global events. When you invest in the stock market, you should be wary and aware of all these factors. There will be trouble and there will be shocks. You have to be patient and exhibit steadfastness. Do not panic or get stressed. It will not solve the problem, so relax and carefully monitor the events and reach a conclusion based on that.
Investing in the stock market is not for the squeamish, that much is very clear. It is ideal for a long term investor with insight into the workings of the stocks and a cool and calm attitude. If you remain vigilant and invest wisely with calculated risks, you are bound to taste success in the long run. It is a great source of passive income and will give you a handsome return if you can do it right. Just hang in there, and choose the stocks to invest in wisely and act promptly for maximum profit. We hope Ourstock future tips will help you to invest wisely in the stock exchange. We wish you all the best.