Whether you are a beginning investor or have been buying stocks for a while, it is always a good idea to learn about simple stock market investment strategies.
To many, investing in the stock market may only sound like a dream; but the truth is, it doesn’t have to be. Cultivating the discipline and focus to invest money regularly is a lot easier if you have defined investment strategies.
Establish separate accounts for specific goals like college savings and retirement so you can tailor your choice of investment vehicles accordingly. An aggressive stock portfolio could be advantageous for a young person with retirement decades away, but a middle-aged person would want to consider less volatile options such as a mix of stocks and mutual funds that closely follow the market index (like the S&P 500). Those nearing retirement age should shift their investments into bonds or certificates of deposit, which are much safer with much less risk of losing money.
If you have children, your state’s 529 Plan might be a great option for educational investments. With 529 plans, you should think about three 6-year phases for your portfolio (while you continue to add to the account on a regular basis each year.) In the first six years after your child is born, you could start with more aggressive stocks or mutual funds. In the next 6-year phase, you should move to a more balanced portfolio following index funds. Then, as your child is in secondary school and, especially when college is getting close, you should move to less risky funds which are more based on the bond markets.
When things are on the decline in a clearly bear market, this is an opportunity to look for stocks that may be undervalued. These would-be stocks that have low prices but may be expected to grow higher in the short run. If a company is stable and continues to show strong earnings, then it could be a good investment while the stock price is lower.
Beginning stock investors should be prepared for the possibility of losing a bit of money on some of their trades. Often times, new traders panic the first time their stock goes down and decide to sell their stocks and buy something else before giving their original investment a chance to recover on its own.
Every stock holder would be wise to understand the importance of patience and persistence. You are likely not going to get rich quick overnight, and you are sure to make some mistakes along the way. However, the most important thing you can do to ensure success is staying with it and not getting discouraged during times when the markets are down.
You should be prepared to wait it out. When you are investing in stocks, it is a good idea to leave them alone for a minimum of five years, unless something drastic happens to one of the companies you have invested in. Make sure that you are able to manage without that money so you don’t end up pulling it out of the market before it has had a chance to earn a decent profit. If the market starts to do poorly, try to remain levelheaded. You should understand that just as the market goes down, it will surely rebound, sometimes over a longer time span. History has shown that over long periods of time stocks have generally gone up on average, so as long you haven’t invested in a very poor company in terms of earnings or performance, you will more often than not see profits with your portfolio.
A good strategy to protect yourself from not having money in case of emergencies is to not invest your safety money in the stock market. Even conservative and dividend stocks can take a beating on any given day. The six-month income you have saved up for a rainy day should go into a money-market account or a laddered tier of certificates of deposit so you have access to this money if needed. After you have saved your safety money, anything over that you earn and don’t spend can be invested in the markets.
Following simple stock market investment strategies can help you feel a little more confident in making your first foray into the stock market, or re-thinking your strategy if your initial investments haven’t been doing so well. By using these strategies, you can begin to think about being more successful with your investing. You probably work hard for the money you earn, so you don’t want to blow it with bad investments. So through research and ultimately experience, you can gain the knowledge and skills to begin predicting which stocks have the potential to be worth more in the future. Apply your new-found knowledge and use it to attain future success!