Home Insights & Advice What a beginner investor needs to know

What a beginner investor needs to know

by John Saunders
29th Nov 21 3:11 pm

You can make millions on the stock market as well as lose them. Let’s find out how much money you need to start investing, how to choose a broker, and whether there is a guaranteed way to get rich trading the stock market. The website https://myfin.us/calculators/credit-card-interest-calculator helped me a lot in creating this article.

Why invest and is it right for me?

Let’s say you have a deposit in the bank, but you are not satisfied with the interest, it is too low, and you want to earn more. But you have to understand: the higher the chance of earning, the higher the probability of losing all the money. If you are aware of the risks and you have free funds, it may be worth mastering investing in securities traded on the stock exchange.

The easiest way for a beginner is to buy securities, and after a while sell them at a higher price, which is how you make money. The main thing to remember is that profit is not blind luck, like in the casino, but the result of well thought-out actions. Not a game, but work.

I want to try. Where to start?

The modern stock exchange is electronic, you can trade via the Internet without leaving your couch. But to do this you need an intermediary – a company that has a license for exchange trading. Before looking for one, it is worth determining a few important things.

Estimate how much you are ready to invest

Theoretically, you can start with any amount, even with $ 100. But this amount will compensate neither the commission of the intermediary nor the time spent on trading. It is worth investing if you are ready to risk a few tens of thousands of dollars. It is better to imagine in advance the situation in which you will lose your money. If you understand that it is not a disaster for your budget, you can try.

Consider how much time you are willing to spend

If you are ready to go through training, immerse yourself in the subject, study statistics and stock market summaries in the morning and follow the charts during the day, you can try trading on your own. Then you will need a broker, who will be your intermediary to access the exchange. You will make your own buying and selling decisions, while the broker will execute your orders.

If you do not intend to spend a lot of time and effort on investing, it is better to consider one of the forms of trust management. In such a system, you make minimal decisions, entrusting the investment of your money to professionals.

Choose your strategy and assets

What is a strategy?

A strategy is a set of investment parameters that determine your style of behavior on the stock market: what assets you trade, how often you sell, and what guides your decisions (e.g., whether you watch news that affects the market).

The simplest version of the strategy

You choose:

  1. Assets;
  2. The period for which you want to invest;
  3. The maximum amount of losses

Let’s say the assets are pharmaceutical and chemical company stocks, the period is 1 year, and the loss amount is 20%. In this case, you immediately sell the assets if they have fallen in price by 20%, even if the year has not yet passed.

If you have chosen trust management, you also need to decide on a strategy. Only in this case, you will choose from offers that are already available on the market or negotiate an individual strategy with your manager.

Frequent mistakes: What not to do

You shouldn’t invest everything you have insecurities

Invest the amount you are willing to accept the loss.

Do not act without knowledge – get training

If you decide to trade in the exchange market on your own, be sure to receive training. Most brokers offer courses for novice investors. Trading programs often have a demo mode: in it you can try your hand without the risk of losing money.

Resist your emotions

Impulsive action can lead to many mistakes. If you are a novice investor, you should not jump at the chance of the slightest price movement on a stock exchange. But you must act decisively if the price changes significantly. Set a limit on how much you’re prepared to lose: let’s say, if assets are down 20%, you sell and, as they say on the stock exchange, take a loss. In other words – you are willing to accept a 20% loss and end trading to avoid more losses. The desire to wait for more – in case it “bounces back” – will be great, but you don’t have to give in to it.

Don’t buy securities of one company with all your money

It is better to buy securities from companies in different industries. For example, when oil prices fall, the securities of all companies in the oil and gas sector suffer. If you buy from a variety of industries, such as chemicals, engineering, and telecommunications, you can reduce your risk of losing money (or, as financiers say, diversify your risk).

Don’t believe promises to earn 500% a day

Only crooks can guarantee anything on the stock market. And a responsible broker should warn you about the risks. The situation on the stock market is volatile, and you alone are responsible for your decisions.

 

 

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.

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