Thinking about investing in the stock market?
Despite what you may have heard, investing in the stock market is one of the best performing investments year over year.
For the past 50 years, the stock market has returned consistent gains for investors.
If you’re not familiar with it, investing in the stock market can sound a bit intimidating. After all, there’s no guarantee of making money or even getting your initial investment back. The terminology and process can be a bit confusing too.
Keep reading for a few stock market tips to help get you started.
Understand the Market
Before you dive into the stock market, it’s important to understand how it works.
What’s a Stock Anyway?
A stock, or share, is essentially a piece of a company. When a company offers stocks for sale, they are essentially selling a small piece of the company in exchange for capital that can be reinvested in the company.
Why Buy or Sell Shares?
When you buy stock, you’re anticipating that the company will grow and continue to improve its profit margin. As the company you’ve invested in grows, its stocks will likely appreciate–allowing you to sell them for a profit in the future.
Know the Risks
While the stock market has appreciated consistently over the years, there are still risks involved. You’ve probably even heard a few stories about people losing considerable sums in the market.
Stocks are not insured by the FDIC like savings accounts or other similar investments, so be aware that losses are possible.
If you’d like to take a safer route, investing in mutual or index funds is generally considered to be much safer than purchasing individual stocks.
One of the Most Important Market Tips–Know What to Look For
If you’re buying individual stocks, it’s vital that you understand the companies you’re investing in.
Before buying anything, take some time to understand the factors that indicate growth or a strong company.
There are a number of services out there that provide free stock ratings to help you make better decisions about where to invest.
Don’t Put All Your Eggs in One Basket
Whether you’re buying index funds or individual stocks, diversification is key.
A common strategy with individual stocks is to purchase a good mix of growth stocks and stocks that will maintain a stable value over the years.
Long-Term Growth–The Key to Stock Market Success
Making money quickly in the stock market is easier said than done. It’s nice to imagine having a stock split and grow astronomically over a short period but, generally, this just doesn’t happen.
One of the best stock market tips out there is to play the long game.
Warren Buffet once famously told his investors, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
Just like you, there are plenty of people out there eager to dive into the stock market but don’t know where to start.