“What to do to earn?” – 5 best tips for novice investors in trading in the stock market
Reading time: 8 minutes
Stocks, dividends, bonds, depositary receipts, mutual funds (ETFs), ETFs are all common definitions of the stock market that millions of people around the globe use every day. (What is the difference between mutual funds and ETFs?)
Being one of the oldest financial markets, the stock world attracts many novice investors with the romance of expensive costumes and fabulous money, the aesthetics of which were brilliantly embodied by more than a dozen cult films. (Watch the TOP 10 movies about trading according to the company “Analytics Online”)
In fact, the stock market is one of the most complex and most important components of the modern world economy, and not everyone is able to comprehend the subtleties, and even more so to earn them. This requires not only experience, understanding of the market, awareness and self-confidence, but also a confident start that will protect you from falling into the “traps” at the initial stages of securities trading.
Today we will give you 5 useful practical recommendations that will help you feel more confident in the stock market from the very beginning:
1. If you do not know which companies are worth buying, give preference to the companies that you use in your daily life.
A simple answer to a question that is relevant for all investors who have just entered the stock market and have chosen stocks as their first investment direction. We explain.
Which mobile operator do you use? In which bank do you prefer to keep money? Do you have a mobile phone / smartphone? These are only the first of dozens of questions that concern your life preferences, and it is the answers to them that will lead you to the right choice of stocks to purchase.
Why these companies? It’s simple: because you know about them, you trust them, and they, in addition to you, trust hundreds more thousands, and even millions of people. Most likely these are large, reliable companies, and this more or less guarantees stability and absolutely exactly the expediency of investments.
Remember: afford to invest in small but seemingly promising companies can either be very rich or very risky people.
2. Build your own investment portfolio and diversify risks.
The stock market provides the ability to trade in stocks, bonds, savings certificates, investment certificates, options, futures contracts, forward contracts, swaps, and other derivatives.
Your task is not to give preference to only one type of securities, but to try to create your own portfolio of instruments that can compensate for the drawdown of each other. Thus, you level investment risks and will be able to get a stable profit from your investments.
3. Start earning dividends
Dividends are periodic payments that companies pay to holders of their shares. The more shares you have, the greater the cash equivalent you will receive. Profit from dividends is usually calculated as a percentage of the value of your stake.
There is a dividend payment schedule for each company that provides its shares for free buying / selling. However, you do not need to own shares for the entire period between payments.
Dividend calendar example
In order to earn dividend payments, you can purchase the required number of shares immediately before the payments and sell immediately after.
This way of making profit from the stock market is a great opportunity to study the stock market functionality, as well as join the work with it and earn money.
4. Take profits when you reach your goal.
Before you buy any securities, make your investment plan. Answer your own questions: what, how much, and for how long I want to buy? What do I want to get in the end?
Such a plan will allow you to identify specific goals for specific trading instruments and begin to achieve them.
The basic rule is that in no case do not deviate from the prepared plan and close the profit / loss upon reaching the permissible limits indicated by you.
This approach will allow you to independently control the size of your investment capital and reduce the probability of losing it to nothing.
5. Do not panic with short-term drawdowns in the moment.
If you decide to dive into the stock market and invest in one of its tools for a period of 3 to 5 years, then we have great news for you – you have come to the right place. The securities market provides ideal opportunities for long-term investments due to the large number of so-called “blue chips” – global companies, investments in which are considered the most reliable and profitable over a long period of time.
Remember: when deciding to invest in a long-term, forget about the moment changes