When it comes to taking a plunge in the investment market, initially it can be a nerve racking experience. Whom should you trust? What financial asset should you buy and the most distressing one is what will happen if you lose money? The concept of investing is rather simple from the core. The problem faced by the investors is that they give way to their emotions and succumb to wrong advice given by less-informed people.
When you invest your dollars, it is the ultimate key to reaching your long-term goals and it needn’t be an arduous or a stressful process. Before you venture into the field of investment, here are few dos and don’ts of stock trading.
DO a comprehensive market research
Before you lock in your precious money into mutual funds, stocks or exchange-traded funds, ensure its worth investing. Radio programs, television shows and other resources of advice can usually take you towards the right path but you have to serve as a starting place. Unless you make a comprehensive market research, you won’t be able to take the right investment decisions. If you can afford to hire a financial advisor, you should hire one.
DON’T time the market
You can never time the market and constantly putting in an effort to time the market will not help. As per what Warren Buffet has to say, a non-professional shouldn’t share the goal of just choosing winners as this is something not possible but he should rather prefer a section of businesses which are bound to perform well.
DO diversify your nest egg
Often it is seen that rookie investors equate the concept of owning several investments with diversification. But you have to understand that a diversified portfolio is not equivalent to only the total number of investments but rather on the kinds of investments. If a 20 year old invests only in stocks, this would be extremely aggressive. You have to know the benefits of diversifying your investments in such a manner that you keep on earning despite the ups and downs in a specific industry.
DON’T let in emotions while investing
During the stock market crash in 2008, there were many investors who saw the value of the portfolios to be cut off into half and most of them panicked. Majority pulled off their money before they could allow let more disappear. Positive emotions while stock market investing can have a destructive result on an investment. Hence, you should train yourself in such a manner that there’s no fear or love for investing.
DO focus on fees
The returns of the year might seem impressive when put on paper. However, once you deduct all the fees that you paid to buy and manage such investments, it is then that the yield looks exciting. As per Forbes, you could end up sacrificing at least 40% of the return towards fees.
Therefore, once you wish to take a plunge in the investment market, follow the above listed dos and don’ts to stay safe.