Last Updated on Dec 19, 2019 by James W
Do not let your lack of stock experience stop you from making huge cash gains in the investment industry! Here is all you need to know about beginner investing
Are you intrigued by the stock market but don’t know where to start? If the answer to this question is yes, you’re in the right place. Did you know that you can start investing with as little as $5?
If you want to start investing but you don’t have any stock experience, keep reading for some tips on how to get started.
How to Start Investing With Little to No Stock Experience
First things first. If you have the money to start investing, the earlier the better. But, don’t just jump in head first without doing a little research first. Start small and work your way up to investing more.
Some of the best cheap stocks you can buy are under $1! Use these tips to help you navigate your first foray into the stock market.
Research & Understand the Market
You don’t need to have stockbroker-level knowledge, but having an understanding of the market and its relationship with the economy is important. Jumping in without understanding economic and investment market cycles is a recipe for disaster.
A little knowledge will go a long way and help you remain calm as the market cycles up and down, as it will do. When stock prices are low, you should buy more. When they’re high, you buy fewer stocks. This is called dollar cost averaging.
Set Long-Term Goals
Setting long-term goals will also help you keep your cool when the market fluctuates. If you know that you don’t need your cash for a few years, it will be easier to stomach dips in the market.
Think about what you’re saving for. Do you need money for retirement, to purchase a home, or to pay for college expenses for your children? Your long-term goals will dictate your investment strategy.
If you need a high return on your investment within a few years, the stock market might not be the best idea, due to the volatility.
Know Your Risk Tolerance
Related to your long-term goals is your risk tolerance. Your risk tolerance is how you feel about risk and the degree of anxiety you feel when risk is present. You can use risk management to figure out what your investment strategy should be.
If you know what your risk tolerance is, you can avoid investments that may make you anxious.
Your risk tolerance might also depend on your age and long-term goals. If you are starting young, say in your 20s or 30s, you can afford to make riskier investments. You’ll have time to recoup those losses if you are saving for retirement, for example.
As you get older and closer to your projected retirement date, your investments should get less risky.
Check Your Emotions
The stock market is not the place for emotions. Making financial decisions using your emotions, rather than your head, usually doesn’t end well. Avoid getting emotionally attached to specific stocks. When investors do this, they often ignore the changing fundamentals of the stocks and are unable to recognize when to sell.
Having a knowledgeable stockbroker or financial advisor can help with this, as they can guide you without the emotional attachment that you may have.
Diversify
Avoid putting all of your investment in stock from only one company. If that company folds or tanks, you lose your money. The advice to never put all your eggs in one basket is relevant here. You need to diversify your investments.
By diversifying, you can reduce the volatility of your investment and protect your stock portfolio from being significantly impacted by sudden changes in market conditions.
Even if one or two sectors under-perform, others might over-perform, and make up for any losses. There is such a thing as over-diversification though, so be careful to strike an appropriate balance.
Evaluate Your Investments Regularly
Your stock portfolio is not a Ron Popeil rotisserie. Do not set it and forget it. You should regularly check your portfolio and make adjustments as needed. However, keep your long-term goals and your emotions in mind. Don’t just jump ship if things are going south; evaluate your options and decide if that fits into your investment strategy.
Evaluate your portfolio regularly and adjust your holdings accordingly to your set exit points. The stocks which are not moving anywhere should be sold so that you can free up the cash for other opportunities.
A good rule of thumb is to only invest what you can afford. Don’t invest money that you can’t afford to lose. The stock market is too volatile to do this. Don’t invest your emergency savings. That should be kept in a savings account or another account where you can access it any time you need it.
Ask For Help
Even though you should have some understanding of the stock market, your investment strategy, and how much you want to invest, there are professionals who can advise you. If you are confused or overwhelmed, talk to a professional.
Seeking the assistance of a trusted stockbroker or investment advisor can help get you on the right path and provide an objective look at your investments.
The Bottom Line
Don’t let fear or lack of understanding keep you from investing in the stock market. You don’t need stock experience to get started and be successful. Do some reading and some independent research, budget what you can invest, and seek out a professional if necessary.
Investing is totally doable, even for beginners. For all things finance, check out our blog. You can learn more about investing, the stock market, making yourself more employable, and how to increase your income.
