Frugal Living

3 Tips You Should Know For Successful Stock Market Investment

Gallup polls conducted in April and July 2021 reveal that 56% of Americans own stocks. Indeed, stocks are a popular investment option for many investors regardless of their complexity. Investing in stocks requires discipline, patience, research, and a deep market understanding. There is no sure-shot formula for complete success in stock markets, but you can increase your chances of obtaining great returns consistently by following several golden rules. Here are three tips worth following for success as a stock market investor.

Be prepared for panicky times

Many financial experts agree that it is prudent to plan for panicky times as a stock market investor, so keep this in mind. This reality is because you will be tempted to part with your stock at some point in time. However, making impulsive decisions can lead you to sell low after buying high. Therefore, write down all features that make the stocks in your portfolio worth committing to. Then, record the circumstances that would justify you letting go of your stock. These circumstances should always be fundamental changes to an otherwise attractive company, like losing a major customer or the emergence of a viable competitor. This way, you can know the best times to let go of your stock instead of merely selling during short-term price shifts. 

Furthermore, it would help to also develop a plan to protect your stock investment. For example, your stock certificate can go missing or damaged if you received it physically instead of electronically. Luckily, you can get a lost stock certificate surety bond to obtain a replacement and prevent your transfer company from incurring any losses if the lost certificate reappears and is redeemed by another party.

Practice with a stock market simulator before investing actual cash

There is no denying that investing can help secure your family’s financial future, but only if done right. Therefore, it is crucial to hone your skills as an investor by using a stock simulator before moving on to the real deal. A stock simulator can help you try out trading strategies and master investing basics. Furthermore, simulation trading can help you understand how business-related news and the bigger economic picture influence stock prices. Finally, you get to practice without putting any real dollars at risk, so you can discover how you would react if you gain or lose cash.

Avoid short-term trading

It is also vital to understand whether you are investing for the future or short-term to determine your strategy. However, many short-term stock investors often have impractical expectations about growing their cash. Indeed, research indicates that many short-term investors, especially day traders, lose a lot of money. Short-term trading is risky due to the stock market’s volatile nature. Furthermore, as a day trader, you are up against leading investors and powerful computers with a better understanding of the market. Also, buying and selling stocks often becomes pretty expensive quickly due to taxes and other fees if you are a rookie investor. 

Furthermore, you risk not having your cash when you need it most if you do short-term investing. Consequently, depending on your financial goals, a savings or money market account may be a better option for short-term money investments than the stock market. Experts typically advise that you invest in the stock market only if you can keep the cash invested for three to five years, so keep this in mind.

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