The famed ‘Lone Wolf of Wall Street,’ Bernard Baruch owned his high seat on the New York Stock Exchange by the time he was 30 years and became one of the top country’s financiers by 1910. While a master of his professions, Baruch had no illusions about the challenges associated with stock market investing. He believed that the primary purpose of the stock market is simply to make fools of as many people as possible.
Ken Little, an author of about 15 books on personal finance and investment-related topics, believes that if you are an individual investor, you should know that the stock market system stacks the deck in its favor. Intelligence is an essential asset in all endeavors. However, a superior IQ isn’t a prerequisite of stock market investment success. According to Peter Lynch, a Magellan Fund portfolio investor (1977 to 1990), you have the minimum brainpower to successfully follow the stock market– if you can really make it through fifth-grade mathematics, you could successfully invest in the stock market.
Here are essential stock market tips for both first-time investors and also the professional ones.
1. Set goals
Why do you want to invest in the stock market? Do you need your cash back in three months, one year, ten years, or longer? Do you plan to save for future college expenses, retirement, purchase property, or to construct an estate to leave to your beneficiaries?
Before you make any stock market investment, you should define your purpose and the time in the future you may need your money back. By determining the amount of capital you require and the time you will need it back, you can accurately calculate how much you need to investment and the right return on investment necessary to produce the desired outcome.
2. Know your risk tolerance
This is a genetically-based psychological trait. It is positively influenced by increased levels of income, education, and wealth. Risk tolerance is negatively impacted by age – as you get older, your risk tolerance decreases.
Your risk tolerance is the extent to which you choose to risk experiencing less favorable results in the pursuit of favorable results. It’s simply your feelings about a certain risk and the level of anxiety present whenever there is a risk. Knowing your risk tolerance can help you avoid investment options that are likely to make you anxious.
3. Keep your emotions under control
The biggest obstacle to getting your desired investment outcome is the inability to control your emotions and successfully make logical decisions. Whenever you decide to purchase stock, you must have a good reason for your choice and an expectation of how the price will change if the reason for your choice is valid.
4. Learn the basics
Before making any investment, it’s wise to take the time to learn the basics about the nature of the market, important elements, and the individual securities that make a stock market. Some of the areas you should be familiar with include stock market order types, types of investment accounts, financial metrics, and the popular methods of stock timing and selection.
Investing in the stock market is a perfect opportunity for you to build a significant asset value if you are willing to be a consistent saver.
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