Most of you don’t have a clear idea of how the stock market works. However lot of you may already have invested stocks. But before investing in stocks, you should know these few things.
It is risky
Whether you invest long term or the short term the risks are equally high. You need to have some knowledge of the company that you are investing in to minimize the risk. For example if you are buying shares of a bank you need to have a sufficient banking industry intelligence to understand if the performances of the bank will do better or worse in the near future. You need to monitor and analyze the performances of the companies you are planning to invest in, that way the risk can be minimized. Read about the company, what they do and if the industry they are in is currently booming or going down. Also it is better if you had some knowledge to analyze a financial statement.
You may need a broker
In the past there were brokers who you could go to physically and get help to invest, but now the brokerage companies have their websites and you can communicate through that. When selecting a broker remember that you need to give them a small commission from each of your share sales. If you buy shares through them and sell through them they will charge a small percentage, most of the time it is about 1%. But this depends on the services they provide. Some brokers go to extend to provide you with good information on the companies you are planning to invest. For example again if you plan on buying stocks of a bank they would provide you with required banking industry intelligence. You wouldn’t have to do the monitoring, analyzing by yourself they would be doing that for you. The brokers charge for these extra services. So before you invest consider that you may need a broker as well, check this negative news alerts.
If you are really into the stock market, just because you found a good company don’t put all your money on that company only. This way of something goes wrong you lose all of it. Like the saying “Don’t put all your eggs in one basket” Don’t put all your money in one company. Diversify in the range of companies you invest. Invest in several different companies across different sectors. Because all the industries can’t be performing badly at the same time, hence you won’t lose all your money. Make sure to take a note about these small things before you decide go all in on investing on stocks.