Many people who are just starting with stock market investments purchase mutual funds. Mutual funds are usually low risk investments due to their diversification. The beauty of mutual funds is that you obtain a nice range of stocks, and you have a professional who is conducting all the research on the different companies in your investment portfolio. It is wise to have a high bearing interest investment account that has six months salary saved in it for a rainy day. This way if you are suddenly faced with unemployment, or high medical costs you will be able to continue to pay for your rent/mortgage and other living expenses in the short term while matters are resolved. If you are targeting a portfolio for maximum, long range yields, include the strongest stocks from a variety of industries. Even while the whole market grows on average, not all sectors are going to grow every year. By having positions across multiple sectors, you can capitalize on the growth of hot industries to grow your overall portfolio. Regular re-balancing will minimize your losses in shrinking sectors while maintaining a position in them for the next growth cycle. Make sure that you spread your investments around a little. You do not want to put all your eggs in one basket, as the saying goes. For example, if you invest everything you have into one share and it goes belly up, you will have lost all your hard earned money. A great tip that most investors could use is to make a rule where you automatically sell off your stocks if they go down in value by about 8% of the original stock price. Lots of times' stockholders are praying for a rebound that never comes, and they end up losing even more money. Investing in the stock market does not require a degree in business or finance, outstanding intelligence or even familiarity with investments. Being patient and sticking to a plan, making sure to remain flexible and conducting research, will serve you well when playing the stock market. Going against the grain often pays off! Do your research. Before buying any stocks, thoroughly research the company. Study its financial history and how the stocks have performed over the last ten years. Earnings and sales should have increased by 10% over the prior year, and the company's debt should be less. If you have difficulty understanding the information, talk to a financial advisor or broker with a good track record in stock investing. Do not blindly follow the recommendations of your investment broker without doing some due diligence of your own – especially when considering an SMSF. Ensure that the investment is registered with the SEC and find some background information on the way that the investment has performed in the past. There have been instances of fraud whereby the information presented by the broker was fabricated. When things are on the decline in a clearly bear market, look for stocks that are undervalued. These would-be stocks that have low prices, but are expected to grow higher in the short run. If a company is stable and promising with a cheap stock price, it could be a good investment. When the stock market takes a dip, do not distress. Instead, look at the fall as an opportunity to purchase stocks at bargain prices. Many smart investors have made fortunes this way, because the market will inevitably rise again. Being able to see past the doom and gloom can be very profitable. Comments are closed.
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