The temptation to jump into the stock market and start earning big bucks can be very inviting but you should never get ahead of yourself! Instead, if you are new to the world of stocks then you should take your time approaching it and gain an understanding of it first. The stock market is a bit like roulette, with you going in on one number (or stock) and hoping it brings back a good return but as we all know by putting your money on one number, you are taking a big risk.
So instead of jumping into the stock market it is usually advised that you begin by buying a low-cost mutual fund instead of going straight for stocks. Then as your knowledge increases, you can develop your mutual fund portfolio and this can then lead onto you beginning to invest in individual stocks.
But how do you choose a stock other than having the idea of buying low and selling high in mind? Below we have mapped out some of the key points to have in mind when buying stocks for the first time.
Invest In Brands You Know
To begin with it is best to avoid any stocks that you have little or no knowledge of. Instead stick to brands you are familiar with and who you know aren’t just a flash in the pan. Of course this isn’t all the information you require to invest in their stocks but it is a starting point and your knowledge of how successful they are or if they have a new product coming out soon can help you decide on investments.
Don’t Follow The Hype
It is very easy to get caught up in hype once you see everyone investing in a company, but in all honesty most of the time these companies are best avoided. If you rush into an investment without an understanding of the company and how they make profit – which is what happened with the dot-com boom – then chances are you are going to be wasting your money.
Learn The Lingo
There are plenty f terms in investment that you should make yourself familiar with, by doing this you will be able to have a better understanding of the stock market and it will also help you pick out good investments. Having an understanding of the market will help you find stocks that are undervalued and these are often some of the best ones to invest in!
Forget Your Misconceptions
The idea of buying low and selling high is quite a short-term idea and it doesn’t always ring true. Usually the companies that are more expensive to invest in are the ones that will yield you slower but more stable returns. In fact sometimes expensive stocks are that way because the market expects them to grow considerably in the future. This solidifies the point that it is a good idea to have a varied stock portfolio and to not invest your money in one stock.