Cliched as it may sound, the golden rule of striking gold in the stock game is simple – planning, patience, and long-term commitment. Agreed, big money is made and lost overnight in stock but once you know the waters you’re treading, creating wealth shouldn’t be an issue. If you think it’s all about staring at the computer screen all day, making rapid trades and keeping track of what big Fortune 500 companies did, it’s not going to help. Let’s discuss what will.
Don’t lose sleep
There is no one rule for everyone when it comes to investing in stock market. Make sure you assess your situation well before making an investment. Don’t make an investment you’re not comfortable with. If you can’t sleep at night thinking you will lose your money, you probably will. Have an objective regarding where you want your investment to take you.
You may be looking to generate tax-free interest, preserve capital, or create current income. If you have an idea of what your objective is, you should be good. Never invest in a business just because of your friends. Family or neighbours are doing it. Make an informed decision and invest in stock business that you fairly understand.
The stock market doesn’t always make sense
It’s never a good idea to time the market. Even ace investors like Warren Buffet wouldn’t dare pull such a stunt. Retail investors plunge into the market at the slightest surge in the stock market. It’s not always a great idea to go with the positive investor sentiment, instead of looking at the companies’ profit performance. Instead of trying to time the market, you should rather invest over a period in a systematic manner, along with investment in stock advice. Also, avoid investing in smaller companies when the market is high. Such stocks may look lucrative but they tend to be quite volatile. Leave it for the seasoned investors.
Create a diverse portfolio
If you want to minimize your risk and make optimum returns, diversify your portfolio across instruments and assets. There are a few factors to be noted to know how to spread your risk. Some of the factors include fixed income, real estate, company growth and value irrespective of size, commodities, real estate, emerging markets etc. The number of investments in stock market you make is not as important as how you spread your risk. Make sure you re-allocate or rebalance your capital in different sectors every six months.
Once you get started, it’s important that you don’t stop. Time will be your biggest ally in this business. It takes time to make money in the stock investment, but the key is to keep going. People who have made it big in the stock market have mostly kept their money in the market for long periods – even fifteen years if not longer.
Most of them have reaped great results. It’s important to keep investing through a systematic investment plan through the lows and highs of the market. This will make sure that you’re investing an average point.
With a little help from the brokers
Getting a good investment broker to handle your transactions really gets you going. If you’re just starting out, and don’t feel very confident, get yourself a full-service broker. You may even choose to go with an online brokerage firm. Just make sure you tick a few things off the list when you are going with an online brokerage firm. See if the firm is a member of the Securities Investor Protection Corporation (SIPC). Check the bottom of their homepage and you should be able to see the disclaimer.
Well, these are the simple rules of making it big in the stock market. Hope you score big.