What Are The Things You Must Know Before Buying Your First Stocks
Posted: Jul 09, 2019
Getting started in dealing with stocks can feel intimidating if you do not have any prior experience in the field. There are several rookie mistakes made by the amateur traders which end up costing them a lot of money. It is difficult to determine the amount of money that you should invest in stocks or the stocks that one should buy. However, many individuals have done it successfully earlier, and you can do it too. The following are some of the basics that you must know before buying the first stock.
The Portfolio In Stocks
The older you get, the lesser you should rely on stocks to ensure that your capital is preserved. A simple trick can help you know how much of the portfolio should be in stocks. You need to subtract your age from 110. The percentage that you get is what you should invest in stocks. You can adjust this figure according to the level of risk you are willing to take.
Individual Stocks Vs Index Funds
You can purchase one investment and invest in multiple stocks with index funds. Index funds are great when you want to reduce the risk by diversifying your portfolio. When your money is spread widely, the impact on the overall portfolio is cushioned. Thus, it is a clever decision to consider index funds over individual stocks. The individual stocks can be difficult to handle if you are not well-versed in the stock market.
The Different Stocks To Buy
You need to buy at least fifteen different stocks spread across different industries to diversify your portfolio. However, it is not a practical option if you are starting. An alternative to getting the individual stocks is investing your money in index funds. You can buy a single or more than one stock with the rest of the money. Thus, you can invest with ease without worrying about any guesswork.
The Choice In Dividends
Many of the stocks distribute their profits to the shareholders as dividends while others use the profit to reinvest. The dividend stocks are less volatile than the non-dividend stocks. It is also necessary to keep in mind when you consider the bear market that high dividend does not necessarily translate into better investments. Reinvesting dividends is useful for the accumulation of wealth on a long-term basis.
A new investor should take long-term views of the markets. The market keeps losing and gaining values every single year. But if you notice very carefully, you will see that the market stays consistent over long periods.. It is difficult to determine the amount of money that you should invest in stocks or the stocks that one should buy. There are several rookie mistakes made by the amateur traders which end up costing them a lot of money. However, many individuals have done it successfully earlier, and you can do it too. You can adjust this figure according to the level of risk you are willing to take. The market only varies remarkably in the short term.
Fareed is a graduate of computer science engineering, a writer and marketing consultant. he continues to study on Nano technology and its resulting benefits to achieving almost there.