Investing in stocks is a very reliable way to earn good money. However, it is not always the case if wrong investment decisions are made. This is tricky because it all depends upon the fluctuating stock prices. What is required is a present state of mind and gut feeling to go with. Some interesting tips can help you in buying the shares but before we dive in, always remember to choose the company wisely. This is where all the difference lies. Below are some tips you can use before investing in stocks.
Be clear on how to want to invest
There are two options on how you can invest in stocks. One; through a broker and second; Robo advisors. The brokers are there to help you with your investment by providing the best options for you and let you decide on what you want and where you want to invest. They charge a commission fee for their services. It is also equally important that these brokers are regulated and legal for reliability purposes. For example, in the UK there are these Financial Conduct Authority (FCA) approved brokers who are assisting the investors. You can choose the best UK forex broker strictly regulated by FCA and you are good to go. On the other hand, the Robo advisors are financial companies that will invest your money based on the goals you provided. They will make the analysis themselves and make the investment decisions on their own that are in your best interest. This is like low-cost investment management services they provide against a fee charged. Again, the decision is yours. How do you want to invest? But be very clear on this before moving further.
Remember you are picking companies not just stock
Yes, it is true when you see so many stocks trading on the exchange, you are attracted to picking stocks giving you the best rates and big returns. But remember the larger picture. You are not just buying random shares but also becoming part-owner of the company, shares of which you have bought. You should be focused on the information of the company for example how it operates, the partners and other stakeholders involved, its competitors, long-term strategic goals, etc. The company should be adding worth to your portfolio. So remember that stock picking should be the last thing you do.
Make sure to plan ahead
Making an impulsive decision regarding some stocks, buying or selling can lead to investing gaffe. You must make decisions based on their long-term impact to help you in needy situations in the future. Time is not always the same. Troubles can come to anyone at any time. For this, you must have plans and backups. Make journals. Write down the strategic importance of each stock in your portfolio. See why you are buying certain stocks. Is there any opportunity you see in the future? Then write which stock would be best if sold and what times the selling would result in profits in regards to the future. Is splitting up the best option? Is the company doing alright in terms of strategy and impact on the share value? Keep an eye and make your plan!
Take your time in buying
That’s right! It is not mandatory to invest in the amount you have allocated for stocks all at once. The right way to invest is gradual. Some buying strategies to help you are as follows
Dollar-cost average
This means you have already set an amount to be invested but at regular intervals. Brokers provide you with this service and then weekly, monthly, or however, you want to. An automatic investment schedule is set up and for one period your set amount buys more stock when cheaper less when prices go up.
Buy in thirds
This strategy implies that you divide your whole investment amount into three parts and then invest the three amounts at selected points in time. For example, you first invest one part before a product is launched and then invest the second part after the launch. It also helps you retain the remaining amount if, for example, the company did not do well, you can invest the remaining amount elsewhere.
The basket
This is for minimal risk factors. Buy in many companies you want to because you could not decide on one. Now whichever will not do well will be compensated by the company which is doing well.
Avoid overactivity
The more you keep an eye on the scoreboard the more there is a chance of making impulsive and wrong decisions. Once in a quarter is enough to see what’s happening with your shares. When you are constantly seeing the trading of your stocks, you can be super reactive to even small incidents that otherwise if neglected is better off. What may look off right now may not be off in the future. That is the whole game with the shares. They are meant to fluctuate before settling down and you must keep away from all that activity to avoid making quick decisions.
Stock investment is tricky and is all about share price volatility. Learn about the do’s and don’ts from the investment point of view and keep in mind the above-mentioned tips before investing in stock. The key point is to be patient and learn about the company. Don’t be focused on quick money. The profits will follow the pursuit once the right track is set by you.