An Investment Guide for First Timers in a Stock Market

Stock market is not mere luck, but implementation of careful crafted practices that would help you make money. Each one of us has the brain power to understand the modus operandi of a stock market.

Each one of us is exploring opportunities to make money at the shortest possible notice. Human nature is on the lookout for unseen forms of wealth. But stock market is not a bed of roses as you will find out once you make your way into the stream. There are some investment tips for a first time investor in a stock market.

stock market

Have a long term vision

Explore the main reasons of investing in a stock market? Are you thinking of making some cash in the next week or coming few years. Are you planning to save in order to build a new house or is it for your future.

Before investing, you should be aware the objective behind it and when you might need the funds. In case if you need the investment on an immediate basis it is better to look for other forms of investment. There is no certain formula that you are going to have the capital when you need it.

If you are aware of the purposes and when you need funds it might help you to plan in a better way. There are a lot of financial calculators in the market that would guide you on how to go ahead.

Be aware about your risk limits

This is a genetically syndrome but is influenced by education, wealth etc. Once these risks ability to tolerate risk increases and once you become old tolerance levels decrease. The tolerance level is ascertained by the degree of anxiety you feel at present.

This is also affected by the perception of risk. Say for example flying in an aeroplane was considered a risk in the 1900’s but in modern days it is not at a risk. When you are investing, perception is very important. In a stock market you can minimize the risks considerably by subscribing to stock trade alerts. Once you gain a fair idea about investments things become considerably easy. This would give you an idea about the levels of anxiety in terms of risk tolerance. In general terms you might own an asset that might prevent you from sleeping at night.

Have a stock over your emotions

In a stock market one of the main hindrances is to have a tab on your own emotions and make rational decisions. The moment a majority of people are worried about a company then the stock prices are expected to fall and if you are positive about the company prices are expected to rise.

If an individual feels negative then he is referred to as bear and if you are positive it is known as bull. During the course of a market session a constant fight between the bull and bear is witnessed. All these are short term market gimmicks that are influenced by emotions and hardly any logic prevails.

Sometimes the stock would have performed a lot better than your expected levels. Still you might be in a state of confusion, whether I need to take in more profit when the price falls. The moment you are buying a stock there is a good reason and to experience an increase in stock price is a valid point. When you are buying a security always craft out an exit strategy. As far as possible do follow this strategy without any degree of emotion.

Be aware of the basics

Before you make an investment it is of prudent importance that you figure out the basics of the industry. Be aware of the individual securities that comprise the market. An old thought that you might hear is that it is not a stock market, but a market of stocks. Till the moment you go on to purchase ETF your focus has to be on individual stocks and not consider market as a whole. At certain times the stock may follow a particular pattern of movement; this is even when the average falls by 100 points or so.

Diversify

For an experienced investor this strategy is bound to bear fruits. The key is not to put all your eggs in a single basket and invest. As far as possible try to diversify your funds and this is a rule to follow in the starting few years of your investment.

In different industries it is better to own several stocks and if this is the case you will be earning profits on a regular basis. Such a strategy would enable you to keep away from loss experienced from your total investment. It is a much better strategy rather than investing in a single company.

Stay away from leverage

In your stock market strategy stay away from leverage which is virtually borrowed funds. Banks or other institutions can provide you loans to trade in funds and that would be around 50 % of the total value of stocks.

This could be a strategy that might work great when a stock market moves up, but what about the other side. If the value of a stock falls it would be a loss on your initial investment plus brokerage to the broker.

You can term leverage not to be good or even bad. But it can be tool that you can use when you have the necessary experience and confidence in your decision making abilities. Over a long term when you are planning to make profits key is to limit the risk.

In comparison to other form of investments, equity investments do offer higher returns and a lot of factors contribute to this.  It is because of easy to liquidity, better visibility and ensures an equal playing field for all. If you invest in a stock market it provides a corpus value of fund These are some of the active tips to follow in a stock market to earn money.

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