Between investors and traders, the former aim for the long term where the approach would be different. Buying shares in order to hold on to them for months and years require a different policy. Occasional rises and falls in value will not bother you as long as the end result is good.
Traders, on the other hand, will be constantly buying and selling stocks, according to the whims of the market. Manipulating the market with such quick action becomes possible also to some extent.
- Beginners need to take a balanced and rational view of the immense possibilities of profiteering from the share markets. Yet, they cannot give in to emotion and take unnecessary risks. Do your own homework rather than accept suggestions.
- Apply common sense and decide to buy shares when they are at low prices if the chances of escalating are high. How will you know? The past often determines the present and the future performance. On the other hand, buying stocks when the prices are high will leave little room for escalation.
- In terms of investment potential of gaining high returns, stock markets are very attractive, but the risk factor is paramount. Most people lose while a tiny majority succeeds in amassing wealth.
- Don’t fall for big company names. It is not always true that the mega businesses generate the highest returns. Maybe they do, but not always. Many smaller company names are known to bring higher returns. Investment in smaller amounts in a series of companies large and small seems to be the safest policy, certainly not putting all the eggs in one basket.
- The risk factor is obvious in a volatile market, but then you are going to get used to it. The general principle indicates that the higher the risk factor, the chances of highest returns are greater. How much of risk can you really afford?
- Investment purposes and periods should help to decide and understand better. Aimed at the long term, do you plan retirement, education, marriage, travel abroad or whatever and when? Long-term investments will probably not let you down while short-term rise and fall in share value are common. Slow and steady would be wise, in order to gain some understanding and perhaps experience losses, hopefully minor.
- Consistent saving for the sake of investment is a wise policy rather than by fits and starts. In business, incomes vary over time as compared to services that bring home the same salary every month. In both lifestyles, a certain amount could be saved regularly.
- Avoid getting emotional or desperate about investments, but do it cool-headedly, with an open mind that recognizes the possibility of losses. Money cannot become the master and ample research on a particular company would help to understand the chances of success.
- Gradual understanding of technical aspects would dawn as time goes on. Software made the task of research so much easier and company histories are available at a glance. Some knowledge of computers and software would be needed too, as well as contacts in the stock industry, perhaps a mentor.
- Big bets are sometimes justified when certainty arises that a company will do well! Starting with small investments, take the golden opportunity when it arises.
- Portfolio consists of money invested, time according to years, and annual earnings.