A Winning Strategy To Successful Stock Investment
The rewards of investing are ever great. So, if $1000 is itching your pockets and you do not know what to do with it, how about investing it? There are many investment options you can choose to work with. One of the most outstanding investment options that you can consider is stock investments.
Have you heard of stock investment or not heard of it all but would like to try it out? In this article, I will explain to you everything you should know about stock investment. It is a lucrative venture with promising returns. By the time you finish reading, I am sure you would have given it enough thought, and you would be willing to try it out. So, without much ado, let us get started.
The 2 Rules of Making Money In Stocks
The first lesson of success in stock investing is realizing that the stock market is not a fair ride, not for the lighthearted. Moreover, success in the stock market has nothing to do with taking the advice of financial experts who appear on the news channels, tv shows, or newspaper columns, often giving out their "hottest predictions."
All the noise you hear from your friends who claim to be experts in stock investing and the newspaper experts will not take you anywhere near the success doors of the stock markets. Success in the stock market calls for utmost patience. If you are the impatient type, then you will have it rough. This brings us to the two very critical rules of stock investment;
Rule 1- Stay Invested in The Stock Market
One critical thing you must know about successful stock market investing is that the more you stay on the market, the more chances of winning. Most investors usually panic and sell out their stocks whenever there is a slight drop in the market. Selling out stocks because of downtimes could be one of the worst decisions you can make. Investing is all about resilience. It is about the ability to continue operating amidst challenges.
Okay, I get it. The falls can be very scary at times. Having people talk about them now and then and the downtrends appearing on the news headlines is indeed scary. However, remember that they only appear scary because people are talking about them.
Let us look at this scenario. The New York Stock Exchange (NYSE) came into existence on May 17, 1792, ever since there have been disasters that would have caused the stock prices to go crashing down. For instance, the two world wars, the cold war, the 9/11 attack, and most recently, the Covid-19 pandemic. Despite these and many other disasters, the stock market has continued to grow steadily, always playing around 10%.
What does this tell you? It portrays the stock market as a resilient market that will always rise to its knees after a fall. As such, you should never panic when the stock market falls. In fact, you should contemplate buying more stock during downtimes. You can always sell them out when things go back on track.
Rule 2- Do Not Time The Market
"I will wait until there is a drop in the market so I can buy stock."
"Buy stock right now? No! Never! It is too expensive."
"I have sold my stock because the market hit an all-time high."
You might have heard people say such statements. In my humble opinion, that is not the mindset of an investor. Financial advisors often try to time the market. So, let us deal look at the first sentiment. Now, ask yourself, what if the stock prices fail to come down for a decade (which is actually probable)? Will you wait for a decade for the stock prices to come down? I guess not. How would you feel if you sold your stock today because the market hit an all-time high, and tomorrow, it hit another all-time, and it goes on and on.
Long story short, never time the market. A recent study shows that missing out just ten days (while waiting for the stock prices to drop) will potentially cut your returns by more than half.
Tips to Making a Real Catch In Stocks
1. What Kind of Investor are You?
Another vital element you should seek to discover before committing your money to stocks is what kind of investor you are. For instance, you should have a clear definition of your goals and analyze the level of risk you will be willing to take.
There are fundamentally two categories of investors in the stock market. The first category comprises speculators, while the other type includes those who follow fundamental investing. The major difference between the two investor categories is in how they view the stock prices. Those who fall in fundamental investing are usually less concerned about the stock prices. On the other hand, speculators typically pay much attention to stock market prices. The first tip to making money in the stock market is to become a fundamental investor. Just purchase your stock, sit back and relax—no need to keep checking the stock prices.
2. Avoid The Herd Mentality
For most investors, deciding whether they should buy or sell out their stocks is usually influenced by their friends or the so-called "financial advisors." Usually, when everyone else is investing in buying or selling a particular stock, the trader will also be overwhelmed to do the same.
However, such strategies usually fail to work in the long run. In stock investing, you should never move with the masses. As Warren Buffet, one of the greatest investors, puts it, "Be fearful when others are greedy, and greedy when others are fearful." Most investors who have followed this strategy have ended up succeeding.
3. Never Try To Time The Stock Market
I have mentioned it already as one of the critical rules that will guide you down the successful path of stock investing. Timing the market can lead one to lose money within a very short time. As it appears, no one has ever succeeded in stock investing by timing the market. The reason is that it is impossible to catch the highest and lowest prices of your stock accurately. If you plan to invest in deliveries, you should never work with such a strategy.
4. Be Disciplined
Success in anything requires one to be disciplined. The stock market is not different. A look into the history of stock markets will bring you to the conclusion that even the best bulls on the stock markets have run into moments of horrific panics. It is no secret that some of the best investors have lost their money amidst bullish trends. However, all investors who have remained disciplined about their funds and the general market are those who have ended up generating outstanding returns. Before you enter the stock market, ask yourself, "do I have a systematic investing approach?" If yes, how prepared are you to stick to that approach? If you do not have a systematic investing approach or you have one but are not following it, then you can quickly lose your money in the stock market.
5. Do not Carry Your Emotions to the Market
As I mentioned in my opening statement, stock investing is not for the lighthearted. With stock investing, if you are to win, then leave your emotions at home. If you are not able to control your feelings, then you can easily lose your money. Most traders are usually lured to the fact that they can make more and, thus, invest in the wrong shares. If you are to succeed in the stock market, then you must first control your fear and greed.
6. Always Have Realistic Goals
You are bound to receive a rude shock if you have unrealistic goals. First, lower your expectations. The stock market will not make you a millionaire within a week. Like many good things, success in the stock market takes time. Never expect the same returns like those of your friends. Therefore, as you go into stock investing, please have some realistic goals.
7. Always Plough Back the Surplus
If you are a newbie in stock trading, always ensure that you invest back the surplus you receive. Doing so will protect you from falling into debt.
Wrapping It Up
Now that you know the tips for successful stock investing, it is time you should give it a try. The only thing that remains now is to open a Demat account and start trading. If you do not have a Damat account, you can register one right away. It won't take you long. I wish you a great stock investing experience.