Investing your money into the stock market is a great way to potentially grow a large savings fund, though of course you won’t get rich quickly from the stock market (unless you’re exceptionally lucky). But if you’re persistent and consistent with your investments, and you research all potential stocks before buying, selling, or trading, you’ll succeed in the long-term.
Consider these five basic rules as you go about playing the stock market:
Buy more than one kind of stock.
There are low-risk and high-risk stocks, as well as your average everyday stocks that fall somewhere in between. Low-risk stocks will almost always provide you with a return (gain), but the amount will almost always be fairly low. In contrast, high-risk stocks have the potential to provide you with a very high return, but they also carry more risk (loss). It’s a good idea to mix up your portfolio with a variety of stocks and mutual funds, so that you always have dividends coming in to make up for any potential losses.
Stocks are more than paper.
When you purchase a stock, you become a shareholder in the company the stock originates from. While this may not guarantee you a job at the company, you’ll have certain perks, including staking a claim on that company’s earnings, and if you choose a common stock over a preferred stock, having voting rights that will help influence the company’s future and growth patterns – which can mean more gains for you.
A stock is worth more — or less — than its price tag.
You cannot judge a stock’s overall worth and potential value simply by how much it costs. For instance, a corporation that is seeing huge profits may have stocks that cost nearly 100 dollars, but provide much more return; and a company that is performing poorly may drag down even the measly five dollar stocks. That’s why it’s so important to keep track of stocks via stock market newsletters and other subscriptions. By knowing how your stocks are performing, you can adjust your portfolio accordingly.
Track earnings with your stocks.
Short-term changes in the stock market are based on predictions and projections. Long-term changes in the stock market are based on how the stocks themselves perform. Both changes can affect the price and value of your stocks, so it’s important to keep tabs on the stock market at all times.