The best way to build wealth is to let your money work for you through your investments. However, it is crucial for would-be investors to educate themselves. You need to learn the benefits of a particular investment, understand the associated risks, and know how to manage your assets for growth.
For most people, stock investments are one of the pillars of growing your net worth over the long-term. Although it is easy to start investing in stocks with the internet, remember that it takes a ton of learning and experience to make profitable decisions consistently.
As a guideline for beginners, below are 20 stock investment tips you need to remember:
#1. Do Your Homework
First and foremost, you must never make your investment decisions by hunches or hearsays. Implement thorough analysis techniques and use data in picking your stocks. Thankfully, there is a vast library of learning resources for “DIY investors” you can access online.
#2. Don’t Be a Pig
The unpredictability of the stock market is not your primary enemy—it is your greed. Remember that many investors become “pigs” and ditch an original investment strategy just because an investment is performing a lot better than expected. Don’t be a pig; stick to the plan and know when to move on.
#3. Don’t Sell Out of Panic
As opposed to holding on to stocks for too long, there are those who leave too soon. Take note that corrections and losses happen all the time, but in most cases, there is always a better time to start selling.
#4. Don’t Buy from Bad Companies
It is fine to buy a losing stock, but you should never invest in a bad company. Once a brand is ruined, it may take years before a company finally recovers. Some, however, may never recover. Either way, these companies are simply not worth risking your money.
#5. Be a Partial Buyer
A good rule to have is never to buy all at once, regardless of how promising a stock is. Chances are, there will be plenty of opportunities for you to buy the stock at better prices. As an investor, you need to learn how to identify the best time to buy stocks.
When it comes to investments, it is always better to put your eggs in multiple baskets as a risk control strategy. Remember that, out of all the strategies under the belt of investors; diversification is the only one that is guaranteed to work for you. Just bear in mind that diversification works best across industries and not companies on the same playing field.
#7. Don’t Own Too Many Stocks
Although diversification is a pretty solid strategy, you should prevent yourself from overdoing it. As a stock investor, you should try not to overwhelm yourself with too many shares. As a rule of thumb, you should limit yourself to only one company for each industry.
#8. Keep Your Cash if You Can
Remember that you always have a choice to keep your cash and abstain from picking up stocks. If you cannot find anything new or something worth buying, then, by all means, keep your money.
#9. Each Day is a New Day
Losing is part of investing in stocks. You will inevitably find yourself a couple of bad deals, but the important thing is to learn and move on. Stop thinking about the bad decisions you made in the past since it will cloud your judgment and overcome you with fear. Keep in mind that it is not an emotions game, it is all about the numbers.
#10. Be Flexible
Many investors “fall in love” with a particular stock or industry that they consequently miss out on other great opportunities. Keep in mind that the market is never static. You need to step out of your comfort zone, be flexible and make the tough calls when needed.
#11. Don’t Trust Everything You Hear on TV
Here’s a cold hard fact: the media will almost always never tell the entire story. That said, you should never make TV the main deciding factor for your investment choices. Dig deep, do your research and try not to be swayed by whatever you see on television.
#12. When the Going Gets Tough, Pick Your Favorites
When things get tough, you should never “defend” all of your stocks especially if they are within the same sector. Always rank your picks according to which you like the most, stick to them, and drop everything else.
#13. Bonds are Friends
Many investors forget all about the bond market. Though it can be considered as the competition to the stock market, that does not mean you should ignore it as a profitable investment vehicle. Just remember that stocks and bonds are different assets, which is why you should do your best to learn about each of them and how they can contribute to your portfolio.
#14. Buy the Best in the Sector
Remember that going for the cheaper company is not always the best route. Expect that the better company is often pricier, so you should see it as a trade-off if you want a more solid investment decision. It is also a good idea to buy blue-chip stocks for safe, long-term keeping.
#15. Ride the Wall Street Promotion Machine
The investors’ perception is a huge driver for market movement. Although the Wall Street promotion machine can keep the prices up beyond reason, the point is they can. That said, beware the Wall Street hype and do your best not to go against it.
#16. Always Wait after Preannouncements
It is common for companies to preannounce earnings and bad quarters. Preannouncements, however, may signal ongoing weakness, so it is best to wait for about 30 days before you buy.
#17. Stick to the Numbers
When it comes to investments, there is simply no room for chance. You should never buy or sell a stock just because you “hope” something will happen. Remember that money and emotions simply do not mix. Stick to the data and leave emotions out of the equation.
#18. Don’t Buy Losers at the Expense of Winners
Some stock investors have the nasty habit of selling the winners so that they could hold on to losers. This kind of backward logic can quickly deflate the value of your portfolio, so it is best to avoid it at all costs.
#19. Find the Bull Market
No matter what happens, there will always be a winning market somewhere. It is your job to find the “bull” among a sea of “bears.” Be it oil, silver, gold, medicine, or tech, something out there is bound to be winning.
#20. Refer to Robo-Advisors
Robo-advisors are automated wealth management services that work purely on algorithms and data. In a way, they are the best kind of advisors because they focus on numbers and not emotions. However, you should still do your research and look for the best robo-advisors that can supply your needs as an investor.
The stock market is a high-risk, high-reward investment vehicle that requires intensive research. The twenty tips above should be your guidelines in navigating this vast landscape. Just remember that the best way to learn is through experience, so go ahead and start acting.
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