So you’ve heard all about the rich getting rich through stock investing and you want to get a piece of the action. However, you have no clue about what investing in stock really entails, or how to make money off of it. This article will provide you with some tips on stock investing for beginners, including penny stock investing, to start off on the right foot.
It’s A Marathon, Not A Sprint
You may have this idea that investing will make you a lot of money quickly. This idea is completely inaccurate. Beginner investors like yourself may be drawn to the quick money dream: buying a slew of shares in penny stocks with the hope that the company will take off so that you cash out in no time at all with more money in your pocket. The truth of the matter is, which seasoned investors know, that investing is a marathon, not a sprint. The odds of penny stocks actually making you a considerable amount of money are very, very slim. You’d be wise to invest that money into fewer costlier shares of various companies, like Intuit stock. If you are looking to start investing, keep in mind that the money you are investing should be left alone for as long as possible, ideally until retirement. Give your money time to grow, don’t expect to get rich quick.
Research All The Options
If you want to start investing, you need to learn about all of the types of investments available to you. Whether you read one of the many books on investing available, or read a whole slew of posts like this one and join an Investing 101 meetup group, it is crucial that you familiarize yourself with the process of investing. You will want to know what a stock is; what investment allocation means; what is a mutual fund; what is an ETF, to name a few. If you do not understand these topics, you should not invest, and definitely do not try day trading. Familiarize yourself with the many investment options available to beginner investors.
Don’t Entertain Distractions
Ignore the investment news media speculating on why stocks rose and fall and what it could mean for long term performance. These TV investment experts get paid to make these speculations. You do not. Understand that a market rises and falls naturally. It will always happen. The hypotheses about why will only distract you. These distractions could cause you to make emotional investment decisions, which is the absolute worst thing you can do. Keep your eye on the prize and off the investment advisors on TV.
Investing a considerable amount of money, whether in Tweedy Browne funds or another investment, is sure to make the novice investor sweat. Rightly so, this is your hard earned money. Each time your stock takes a dip you may get anxious and question your decision to invest, but don’t. Remain calm, don’t let your emotions get the best of you. In the market, stocks rise and fall every day, even multiple times a day. If you allow your emotions to get the best of you, you would be doing your finances more harm than good. You should definitely keep abreast of whats happening in the market, but don’t let a short term lull scare you off. Seasoned investors have the foresight that many beginners lack and know that even though things may not be going so well now, they will probably bounce back. When they do, make sure not to take your money out so quickly. Practice your restraint, and wait to see what happens. Your wallet will thank you for it later.
Spread Your Money Around
Another mistake beginner investors can make is buying too many shares in similar markets. Do not buy Apple stock and Windows stock too. In order to keep risk low, it is better to make sure your portfolio is diverse. That is to say, make sure you buy stocks in different companies that operate in different industries. This way, if one of the industries you’ve invested in slows down to a crawl, you will have other stock options to fall back on and put your mind at ease. It’s okay to put some money into a high-risk venture, but make sure to level the playing field and invest into some low-risk options as well. This way no matter what happens in the market, you will be secure in knowing that for each stock of yours that isn’t performing well, you’ve got plenty of others that are doing just fine. This will give you peace of mind and allow you to remain calm like the seasoned investors you hope to one day become.
There are many nuances to be aware of when looking to become a first time investor, but these three tips will help guide you into a successful investing journey without having to pay for the services an investment management company. As long as you know that your money will do best the longer it is left in the market and do not allow your emotions to get the best of you when things don’t look so good, you will avoid the mistakes made by beginner investors like yourself. Keep in mind that you can manage your risk, and your nerves in kind, by spreading your money around into different industries with differing risk levels. This way if one area of your portfolio isn’t doing well, you have peace of mind knowing you have money elsewhere. Remember these tips when you decide to take the plunge into stock investing and you will be a seasoned pro in no time.
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