Investing in stocks is no rocket science. But you will need a rocket (luck) and science (research) to become a successful investor. There are many minute things that an investor needs to keep in mind to be a successful long term investor. Almost everyone can earn short-term profits, but to earn it consistently over a stretch of time will require some skills. Before you start investing, you need to choose the way to move forward – whether you go the brokers way or the DIY (Do It Yourself) way.
Choosing the right broker will essentially give you a head start because of his market understanding but you won’t learn how to invest. You will only learn how to deposit the money in his account. It’s like going to a foreign college with a scholarship but without knowing the alphabets of your mother tongue. That doesn’t sound very pretty, does it?
The second way is a bit tricky to get going. But trust me, once you start off, it’s an entertaining roller-coaster ride. Here are the steps to be implemented before you start investing in stocks –
- Learn About Stocks And Stock Markets
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The very basic layer of any kind of investment is knowing more about it. You need to search the web, read newspapers, watch debates or documentaries or talk to experts to know more about stock markets and the variety of stocks. If a stock attracts you, check the information about the Incorporation, their profits, the sector it belongs to, its recent financial statements and other necessary information.
- Know The Difference Between Various Types Of Financial Instruments
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There are many types of financial instruments in the market that can be invested into, some liquid and some illiquid. The most common mistake most of the beginners make is they mix up the characteristics of stocks and mutual funds. Both of them are very different from each other. You must assure yourself of successfully differentiating between these two.
- Set The Right Budget
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It is necessary to chalk out a budget for yourself and see what amount of your income can be invested in stocks. You should try and be defensive at the beginning and start small. Once you gain enough confidence, you can gradually increase the invested amount. This will give you a level of safety and reduce the chances of losing your hard earned money.
- Open An Account
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The easiest step is to open an account through which you can start investing in stocks. There are many websites which charge differently for opening an account and some of them provide you some added benefits for investing through them. Evaluate every alternative and choose the best one for yourself.
- Get The Volatility Combination Right
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Every stock varies in terms of its characteristics. Some are highly volatile whereas others are relatively less volatile. There are many factors on which volatility of a stock depends, like the sector in which the company operates, etc. Be careful to try and not invest in highly volatile stocks only. Get the right mix so as to minimize your chances of losses.
The idea of investing in stocks may not seem very appealing to all but it certainly is a lucrative one if you get the nuances right. You just need to strike the right chords.