Any individual venturing into the stock market for the first time needs to come prepared with a plan. A set of guidelines to shape your goals, strategies and actions can go a long way toward putting you on the path to long-term success and greater financial freedom. Failure to properly equip yourself or to follow these guidelines, on the other hand, can quickly lead to failure and greater financial difficulty.
In order to put yourself on the best path to success as you begin to explore the world of capital markets, be sure to follow these clear dos and don’ts.
- Study and understand your own situation. As investing is a substantial undertaking and potentially very risky, it’s critical that any new investor first takes the time to assess their finances and consider their needs. These items will help to shape their goals and strategies later on. Be sure to consider all the details of your situation – from your age and income to your monthly expenses and loan obligations. Also, make note any potential future developments – for example, if you’re planning to have a child soon or buy a home. Any factors that might impact your finances should be considered.
- Form realistic goals and expectations. In all stages of investing, it’s important to not be too aggressive. In forming an investment plan, this means not investing more than you can afford based on your monthly expenses. When it comes to selecting individual investments, this can mean not investing money that you can’t afford to lose in risky ventures. In setting goals, however, it’s important to understand that gains will be limited by how much you invest. Nevertheless, investors must consider limitations as a matter of course – you can’t invest the money you need to pay rent next month.
- Settle on a strategy and stick with it. Most investors don’t employ any one strategy. Instead, the decide on a mix of investments that have different goals, including aggressive growth, conservative growth, or income generation. The balance of these strategies is up to each individual investor based on risk tolerance, liquidity needs, and other related factors. No matter what strategies you decide to employ, it’s important that you don’t invest in things that you don’t understand. You also need to avoid being swept up in an investment that’s experiencing short-term popularity, but may have weak fundamentals. Instead, conduct extensive research into not only strategies, but individual investment alternatives in tried-and-true industries. If you can’t understand how a company makes money, don’t invest in it.
- Never, ever, ever borrow to invest. Even alternative lenders are generally sophisticated financial institutions with decades of experience and complex financial models to employ. Lenders set interest rates based not only on borrower risks, but also on prevailing market forces. The odds of consistently achieving a higher rate of return than the interest charged on borrowed money are stacked heavily against an individual investor. In the meantime, however, debt service can get very expensive. It may even require an investor to sell investments at a bad time just to cover the cost of debt. If you’re going to invest, do so with savings – not with borrowed money.
- Always seek wise counsel. Very few investors can go it alone. Even fewer should. The world of investing is extremely complex and ever-changing. New alternatives are always being created. Cost-structures change, as do the potential risks that investors face. What’s more, it can be very difficult for investors to fully understand their own financial circumstances. Working with a qualified advisor – or even just more experienced investors in some cases – can go a long way to helping a new investor better understand their own circumstances, the risks they face and how best to navigate the rocky waters of the stock market. If you really want to put yourself on the best path to success, enlist the help of an expert early-on.
There is a lot to know about Forex trading and the stock market in order to increase the odds of success. Investing is a complex issue that is ever-changing as the world reacts to numerable factors including political events, economic forces, and changing population dynamics. Today there are not only massive companies like Facebook that didn’t even exist ten or twenty years ago, but whole strategies of investing that have been created in response to changing priorities among the investing public. Things like impact investing have become popular in response to the new importance placed on sustainability, corporate responsibility and environmental stewardship. To invest successfully requires continual study. Investors must constantly be learning lessons, broadening horizons and reaching new depths of understanding. Look at investing as a process rather than an event, start out cautiously and stay mindful of these dos and don’ts.
Disclaimer: GO Markets Pty Ltd (AFSL 254963 ABN 85 081 864 039 ACN 081 864 039) is an Australian MT4 Forex Broker, offering a trading platform which provides access to a variety of markets including Forex, Indices, Commodities and Binaries. It does not offer the option to trade in stocks whatsoever, the nature and topics covered in this guest article submission should not be misconstrued as a representation of GO Markets dealing in this financial product – but rather it is provided purely for educational purposes.
Yaazadee has a wealth of experience with an extensive career spanning a variety of leading global financial services organisations. He currently writes for GO Markets and enjoys sharing his expertise and knowledge of complicated financial matters to both newcomers and veterans of the industry, translating sometimes complicated financial jargon into simple to understand ideas.
You Might Also Like: How To Make Smart Investment In Stock Market