Do you always want to run away from the idea of stock trading because you just do not understand anything about it?
If your answer is ‘yes’ then it’s time to reconsider your thoughts. Trading in the stock market can be both fun and of much interest, provided you know a few stock market investment tips as a beginner and know basics of how the stock market works.
It might be worth mentioning that many people have been lucky enough to earn millions in the stock market overnight knowing some basic tricks of investing in shares, while some have lost fortunes.
So if you want to try your hand at investing in stocks then better make some preparation. If you are looking to make a start in stock market, reading about some smart tips when investing in share markets would be a good start.
I thought of putting together one such article and in this post, I am writing about top share market tips and tricks for beginners that would help you to invest in stocks in a sensible manner.
1) Stop Frequent Buying and Selling of Stocks
Some people, mostly beginners, trade their securities rather too often (related: 3 important things to know as a new investor!). It might be due to the tips they hear on TV or the advice that is bombarded by the friends.
These things can make you feel that you need to sell your current holdings and buy what’s recommended. However, this doesn’t work out well over a long term.
In the process, you only manage to make your broker rich because he rakes in trading fees. If you buy and sell frequently (read: when is the best time to invest?), then the benefit will be negligible compared to the losses you incur.
Being greedy does not pay in stocks. Remember what Jim Cramer says: “bulls make money, bears make money, hogs get slaughtered”.
This habit is not tax friendly either. You would often need to pay short term capital gain tax instead of long term long term capital gain tax which is lower.
Also Read: Sold the shares; do I have to pay tax?
2) Do Not Panic
Stock market is essentially for investors who like to experiment with their money.
As a beginner, fear of losing in the share market may sink your ship. Of course, you ought to be prudent and cautious while investing in stocks but it is very important to hold your nerve when the market goes down.
To win in the long run you should sell only when it yields you proper money. People who are driven by panic are prone to buying high and selling low.
Also Read: How to decide when to sell Shares?
3) Understanding Stock Market Investment Strategies
You should be aware of the basic investment strategies before you put your right foot forward in stock market investment.
Warren Buffet believes that it is wise to invest in stocks that are undervalued by the market. He rightly points out that if you choose stocks with lower potential but higher price, then it might make you a winner in the long run.
These kind of stocks usually grow faster and earn more than what people expect.
Technical analysis is another strategy that is widely used. Here, charts are used to predict the movement of stocks. It should be noted that this technique works best for short term trade rather than long term investments in stock market.
Also Read: Don’t let the Sensex guide your senses!
4) Choose Your Broker Carefully
Finding out the suitable broker for you can make a difference!
While most people settle with brokers that their friends or relatives use, it might be useful to get yourself the best broker by doing some research. You should make sure that your broker has certain qualities.
Firstly, the broker should allow you to place trades online. This is important because placing a trade online saves you quite a few bucks compared to doing the same in person.
Secondly, don’t hire a broker who charges high fees. More often than not, their advises are not useful. Moreover, if the fees are quite high then it will eat your profits.
Finally, if you are a novice then choose a beginner-friendly broker. Some brokers are geared more towards veteran investors and their intricate methods may confuse you.
5) Beware of Stock Market Scams
Stock market has its share of shady people but if you are careful then you are safe enough.
Stay clear of offers which promise more than 50% return. Likewise, a guaranteed return is a doubtful case. Only a bank CD or Treasury bond can assure you of a guaranteed return.
Scam emails informing you about a golden investment opportunity, are of course scams. Surprisingly, many people fall for it.
Also, remember that whenever someone tries too hard to sell you something, his motives are perhaps questionable.
Also Read: 4 golden rules of equity investing
In this post, I have tried to compile some top share market tips for beginners, but this can help you as an experienced investor too!
Investing in stocks is not as difficult as it seems. If you have some basic ideas then stocks can be a very lucrative proposition. So remember the above points and give stocks a try.
This is a guest post David Brown. David is the founder of fileyourbankruptcy.org, where he writes articles on Personal Finance.