Stock Market Investing For Beginners

Stock markets, beyond The Wolf Of Wall Street!

A lot of us have seen the iconic films based on investing, The Wolf Of Wall Street, Glengarry Glen Ross, The Big Short to name but a few. Beyond the quick wins, apparently lavish lifestyles and fast paced life on the street, let’s take a step back and see the stock market for what it is – an exchange.

At any given time, thousands of individuals are selling or buying corporate securities on one of the stock exchanges or the NASDAQ. Some are wildly successful while some make a decent living.

Others get too emotionally involved, panic and lose everything! but the application of a few simple principles derived from the experiences of millions of investors over countless stock market cycles.

Having a few key indicators to look for when considering a stock investment is a more solid approach than just betting on luck! Below are a few tips to help you make wiser decisions about your stock market investments:

• Think long-term

What are your reasons for wanting to invest in stocks? Where will you be in a year or three years from now? Will you need to call on your cash? Are you hoping to build a nest egg for your retirement? Maybe you want to build an estate to leave your family.

Before you invest, be grounded in your reasons for investing and consider the most likely future date when you may need the funds. The stock market is volatile, so if you might need your funds in the short term, consider another investment option.

• Know your tolerance to risk

Psychologically, your risk tolerance is the trait that’s genetically based but is positively influenced by education, your income, and obviously your wealth. There’s a positive correlation between increases in these to increases in your risk tolerance while conversely there’s a negative correlation to increases in age (as you get older, your risk tolerance goes down).

Basically, your risk tolerance could be summed up as this: your general feelings and the degree of anxiety when you are faced with a risk. As an example, if you had $100 to invest now, for the opportunity to potentially make $500, how would you feel about it?

• Be the master of your emotions

When stocks are going up and down and potential gains or losses are being watched by an investor, their biggest challenge lies in controlling their emotions, while thinking rationally to make informed decisions.

In the short-term, company share prices reflect the collective emotions of an entire investment community.

For example, if the majority of investors have concerns over a company, chances are that the particular company stock price will decline or when they feel positive towards a company’s future, then its stock price tends to increase.

Before you make millions

The stock market is a somewhat level playing field, due to its transparency, regulatory authorities and high liquidity, meaning the investor is more informed at all times.

Historically, this has led to significantly better returns that other investment vehicles. The younger you are when you start investing, the greater your end results will be. But remember, do your homework, be patient and don’t risk too much capital!