Jewel Beat
Would you believe me if I told you that a mere investment of $3,000 in NVDIA stocks, 20 years ago, could’ve made you a millionaire today? Not just NVIDIA, you could’ve booked unreal profits if you had invested the same amount in companies like Apple, Tesla, Netflix, Amazon, and more.
Being a full-time financial analyst, I meet and guide people who want to invest in the stock market every day. While a lot of them are clueless about how this whole thing works, some people come prepared with research.
Nonetheless, there are some general guidelines I provide to every beginner. First of all, I advise them to only invest the money they won’t need soon. This is simply because investing in stock markets is a long-term game.
Other than this, there are five more factors I explain, and if you want to know more about them, read on.
1. Financial Markets Are Highly Volatile
Not just the stocks, every financial market, like forex (Foreign Exchange) and crypto, is highly volatile.
Sticking to the stock market, the primary reason for its high volatility is the demand and supply. Every day, millions of people buy and sell their stocks, which creates volatility.
Additionally, changing external factors like the economy, wars, and other major events can also influence the stock markets. Here, I’d advise beginners to be careful of this market volatility and always trade on a swift internet connection to avoid losses.
It’s because no digital brokerage platform works without an internet connection. And, as trading apps have to fetch real-time market data, it’s vital to connect them to a high-speed connection. This way, you can easily analyze the market’s movement with real-time data and open/close trades accordingly.
Speaking from experience, I’ve missed some perfect opportunities to enter the market for this reason.
And, only when I switched to Spectrum did I get rid of this frustrating issue. Their Gigabit plan is exceptionally fast, and I can use multiple services in real-time simultaneously. Also, its responsive Spectrum customer service has always helped answer my queries.
2. Never Invest in the Stock Market Without Prior Knowledge
Frankly speaking, investing in stocks can be complex. And that’s why I never recommend my clients to invest in the stock market without any knowledge.
First of all, you should understand all the technical and fundamental factors that can affect the stock prices. Other than this, you should analyze a company’s financial performance, long-term plans, and its industry growth to determine if its stock will skyrocket or not.
Now, I won’t suggest that you go for paid courses to understand these fundamental factors. There is ample material available on the internet in the form of informative videos and helpful articles.
In short, it’s best never to invest in something that you don’t understand.
3. Don’t Pay Attention to the Rumors
Once you enter the stock market world, you can be bombarded with fake news, speculations, and rumors.
Speaking from experience, some of them can be true. However, most of them are fake and are systematically spread around to create panic and fear among stockholders.
As a beginner, I’d advise you not to pay any attention to such news, even if it’s true. Trust your technical and fundamental analysis, and follow your trading strategy. Also, you must verify every piece of information that can affect your portfolio.
Having said that, such an approach should also save you from FOMO, or Fear Of Missing Out. You can call it a fake sentiment created by spreading rumors and fake news to initiate panic buying or selling of stocks among stock traders.
4. Create and Follow a Plan
Helping beginners create a trading plan is my favorite thing.
First of all, I always recommend people to invest the spare amount, which they can hold in the market for a long period. Second, it’s not true that the stock market always gives great returns. And for that reason, it’s best to have a plan in mind.
So, to start investing, decide how much you want to invest and choose a digital brokerage platform.
There are multiple brokerage apps available, such as Fidelity, Schwab, and more. But choose it carefully because once you invest your amount, switching and transferring your funds to another brokerage app can be a hassle.
After this, explore different companies you want to invest in. Here, I suggest you analyze their financial health, vision, and upcoming projects to understand if it’s investable or not.
Lastly, always keep a watchful eye on your portfolio so you can make timely decisions and protect your portfolio from unnecessary losses.
5. Control Your Emotions
Often, an irrational and emotional approach leads to significant losses in stock trading, and hence, there should be no place for it in trading. I believe that when you act emotionally, it impairs your ability to make rational decisions. And at the same time, it can stop you from seeing the bigger picture.
I’ve seen countless people holding on to unprofitable trades for long periods. Instead of closing and minimizing their losses, they remain hopeful that one day, the same trade will end up in profit. I believe it’s a prime example of when you’re being controlled by emotions.
And in most cases, such people end up washing their portfolios or closing their trades with tremendous losses, which they could’ve avoided.
So, be it researching companies, technically or fundamentally analyzing them, or opening/closing trades, never allow emotions to take over.
Frequently Asked Questions
What is the minimum amount I can invest in the stock market?
There is no minimum amount required to invest in the stock market. As long as you have the money to purchase a company’s stock along with the brokerage fee, you can invest in the stock market.
Is it risky to invest in the stock market?
Yes, not just the stocks, investing in any financial market can be risky.
Do stock markets operate 24/7?
No, stock markets usually operate during working hours and are closed on the weekends.
