Tuesday, August 30, 2011

6 Tips for New Investors in Stock Market

Bangalore: Investors trade stocks for many different reasons, such as for a hobby, a challenge, retirement, a full time job as a stock trader or just to make some extra money. Dealing stocks and shares can seem like a nightmare to the first time investor. Stock market for beginners often seems very discouraging. Many believe that it's a dangerous place to invest in, but in fact, stock market investing can be very safe. The people who invest in stocks for the first time get involved in stock market investing without the sufficient knowledge, and they expect to gain large returns, but end up losing too much. Making an investment is thus not easy for any investor even if the investor happens to be a person with lots of experience in the field of investment as well as in the stock market. The stock market is a lucrative area to make money in but only when you know what you are doing.

So if you planning to invest in the stock market for the first time you need to be sure of all the facts and details before any real investment is done.

Investing in Stocks is Not a Hobby

 
Investing in stocks should be treated as a business. You should understand the terms profits and loss and know what is needed for investing in a company. Know about the company you plan to invest in. Once you all have all this clear in front of you, the entire process of investing in stocks is easy. Question yourself "Will you make profit by investing in this particular company?" Initially you might take it as a game, but the real skill starts once you plunge into it completely.

Never Invest More Than You Can Comfortably Afford





Approach each investment with caution. Do a complete research of the company. Do not plunge into a company without doing a research on it. Read up about the stocks and take the time to know the businesses that you are going to invest in. That will help minimize your risks. Always invest the money that you can afford to lose. Don't get enthusiastic with the thought of making more money while deciding on which company to invest in. Since this gives a great risk of losing one's money.

Value & Pick Stocks




The investor having sufficient risk taking capability must also know how to value and pick stocks. I am sure you don't want to invest in stocks that will make no money. It is possible that two stocks have the same price but it may not have the same value. Value of stocks is not only decided by its price but also other factors of companies balance sheet, net profit margin, product, brand name, management, the market capitalization of a stock. Companies with a big market capitalization will generally means less risk for shareholders. Actually stock market is never risky; it is the bad decision of the investor that makes it risky.

Spread The Risks




Don't put all your eggs in one basket, especially if you know the stock you are investing in can be quite risky. It's right that some stocks with higher risks m?? return higher profits. But what if the stocks fall? If your investment is spread out over a wide variety of stocks, it will minimize the risk of partial or total loss of capital. Diversifying capital is very important.

Don't Let 2 Emotions Drive You




Rising markets require greed control just as surely as falling markets demand protection against fear. Don't invest a huge a chunk of your investment in only one particular stock with the thought of earning a quick buck. And stay far from fear because it can stop you from even entering a trade the moment you think you should go ahead and invest in that stock. To overcome this fear it's best to paper trade before you deal with real money.

Know When to Cut Loss




The decision to cut the loss could be a correct choice you made. Don't hold on to a stock that you know is going nowhere. Know when to cut loss when you invest in a stock. That way, you won't be caught holding on to a stock for long that yields no profit.      

No comments:

Post a Comment

social media buttons