It’s easy to get carried away by your emotions when you’re involved in stock trading. Even the most experienced investors make mistakes at times because they get emotional and find it difficult to drop a losing stock. Or they listen to ‘insider info’ from a friend that turns out not to be true.
Follow the 5 stock market tips in this article to steer clear of the pitfalls that sink many investors.
1. Know your risk tolerance
If you’re a senior who has a small nest egg that you built from saving over the years, do not make the mistake of investing in volatile stocks. Ignore what people may tell you about quick returns or guaranteed winners. Invest safely in stocks that are stable and seem ‘boring.’ At least you know your money will be much safer.
2. Do not be emotionally attached to your stocks
You must have a system of investing that you do not deviate from. For example, cutting your losses when the price of a stock drops to below 8% is a good plan. However, if you’ve invested about 20,000 dollars in a stock and the price has dropped to this level, you will be reluctant to let go. The urge to cling on to this losing stock in the hope that the price will rise and you can recoup your losses will constantly nag at you. At times like this, you must stick to the plan and cut your losses and run. Ditch the stock and invest the money in a new stock that shows promise. You may recoup your losses and make more than what you’ve lost. Staying on a sinking ship will only lead to you drowning.
3. Buy a stock that’s at least $15 a share
If you do not have the money to invest in a stock that costs $15 a share, you’re not ready to invest in stocks yet. Save up till you have enough to invest in companies that are well-established. Of course, you can find companies with share prices at 5 or 7 dollars. However, in most cases, these companies will not be proven or stable enough to invest your money in without worry.
4. Keep things simple
If you’re new, it’s best to keep things simple and invest in domestic stocks. Avoid riskier investments like forex and options trading.
5. Streamline your investments
Sometimes you may come across a stock that is doing very well and you want to buy some of it but you do not have enough money to invest. At times like these, you will want to sell off the stock that is performing the poorest in your portfolio. Once you sell that, you’ll have funds to invest in the better stock. The goal here is to make your portfolio as profitable as possible.
Do not be emotionally tied to your stocks. Just by following these 5 stock market tips and you’ll be a much better stock trader. Of course, this is just the tip of the iceberg and there are many more things that you need to be aware of. Spend time researching and learning whatever you can so that you will be a wise investor.
One of the best ways to speed up your investing success is to simply copy success. Someone who actually invests himself, who has a proven track record, and who is prepared to show you EXACTLY what stocks he invests in every day is Grant Gigliotti.
>> Check out his results with BTMA Wealth Builders Club