4 Valuable Investment Tips for the Novice Stock Investor
There’s a plethora of information out there about how you should go about investing in the stock market. But as a novice, there are certain investment tips you should follow that will be beneficial in your journey to becoming a seasoned investor.
1. Only invest what you can lose.
Before you ever invest you should have all your debt paid off, including credit cards and loans. After all, the interest you’re paying on debt could be much higher than what you could earn from your investments (and on top of that, you could lose in your investments AND be stuck with the same amount of debt). You should also have a sizeable emergency fund in case you lose your job or have to make an emergency car payment or unexpected medical bill.
2. Stay disciplined.
Staying disciplined means that you have set a certain gain/loss point for each stock you’ve purchased. If you had a plan to sell at a certain gain or loss amount, stick to your original plan. Don’t get greedy because you think the stock is going up any further. In fact, it could sink the next day. Leaving money on the table is better than leaving the table with no money at all. The same is true for losses. Don’t sell just because you’ve hit a negative, but instead stick with your original plan. If you were planning to sell when it hit a certain loss point, regardless of whether you think it will go up, sell sell sell. You could be avoiding further losses. You’ll always win some and lose some.
3. Don’t get emotional.
Many people will get aggressive after a loss hoping to make up the money. Investing with reckless abandon only causes you to lose your discipline and is no different than gambling. Even if you’ve experienced a big gain, you should still stick with the method that allowed you to get there rather than throwing more money at it.
4. Know when to walk away.
Walking away is one of the hardest things to do in investing. If you’ve made a bundle of money from a darling stock, it’s hard to say goodbye and walk away with earnings and leave money on the table. Conversely, if every media outlet is telling you that the stock you bought is going down with good reason, there’s no reason to go down with a sinking ship. A great way to stay disciplined is by setting up automatic trade signals when a stock hits your target high point or low point. No matter how much money you have in the stock market or how good you’ve become, sticking to these fundamental investment tips will better your chances of succeeding in the stock market.
