A retail investor, also known as an “individual” or “small” investor, is someone who buys and sells securities for their personal account. They traditionally deal in smaller amounts than investment organizations and firms. However, individual investors still take on a risk by doing everything for themselves similar to NFL futures. This is why it is important that any aspiring retail investor follow these five tips below.
Get Multiple Research Sources
The first big tip you can follow as a retail investor is to get multiple research sources for all of your potential investments. Learning as much as you can about the company is important. However, you can not trust the numbers that they give you. Find unbiased, third-party sources to verify any statistical information you collect.
Review Your Portfolio Regularly
The next bit of advice you should always follow is to review your portfolio regularly. As an individual investor, you do not have a team or broker keeping track of your investments. All of this work is on you. If you lose track and let something slip, you could miss a promising opportunity. Go over your investments as often as you can and consider how the current state of the stock market effects them. If needed, you can use an IRA recharacterization to increase access to capital. As long as you always do your research, you should be able to succeed.
Do Not Benchmark
Benchmarking is when you compare your performance to index performance, like the S&P 500. As an individual investor, you should not use the S&P 500 to benchmark. In fact, you should not use any index to benchmark. This is one of the most important aspects of trading for beginners. Instead, benchmark against your personal investment goals. This is the best way to learn what returns you need to reach your goal. Benchmarking using your own investment objectives will give you a much better idea of how you are performing relative to your goals. This is much more worthwhile information for the individual retail investor.
Quality Rather Than Quantity
Many first-time investors have the misconception that the stock market is solely about buying low. This is not always true. In fact, buying the cheapest stock you can find can end up losing you money. It is better to invest in quality stocks that have potential for growth, rather than the most inexpensive ones you can find. Spending your money on one moderately priced stock can often be better than buying ten cheap ones. Follow this tip to avoid wasting your money.
Be Sure To Avoid Story Stocks
Another key tip for retail investors is to avoid story stocks. These are the type of stocks and companies that you hear gossip about. If other investors are buzzing about something, that does not necessarily make it worthy of your time or money. At the end of the day, there are many companies with impressive point of sale numbers that are not in the news. Focus on legitimate statistics and facts when it comes to research investing. If you do this, you are much more likely to succeed.
Concentrating vs. Diversifying
Finally, as a retail investor it is important that you find a balance between concentrating your investments and diversifying them. Learning options strategies will come in time. If you are a beginner, you have likely heard numerous tips about how important it is to diversify your portfolio. While this does have some truth to it, diversification is not the only way to go. Concentrating your investments with carefully chosen stocks can be just as fruitful.
There are many tips out there for small time investors. However, these six tips above are your golden ticket to stock market success. As long as you complete thorough research and focus on quantity, you should find your investments fruitful. This is true even if you want to become a Forex trader. Follow these tips above if you truly want to succeed as a retail investor.
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