More and more people are waking up to the idea of putting their money in the stock market, rather than leaving it dormant in a savings account.
This is good news, but there are still a lot of things you need to learn if you’re a beginner when it comes to this type of investment.
It’s easier than ever to invest in the stock market
Modern tech makes it a breeze to browse and trade stocks from major corporations and up-and-coming companies alike.
This is possible when you use platforms like SoFi for investing because rather than having to go through the rigmarole that was a requirement in the past, you can simply make picks from your smartphone, and track the performance of your portfolio wherever you go.
Better yet, you can make the most of modern investment services which automate everything for you. You’ll pay a small fee for this type of service, but it saves you the hassle of having to stay on top of the ebb and flow of the markets yourself.
Your investments can go down as well as up in value
This is perhaps the most important element of the stock market which newcomers have to appreciate, and that’s the fact that there’s no guarantee you’ll make back more money than you put in.
Of course, this depends on everything from your investment strategy to the amount of time you’re looking to stay in the market. Those with longer-term goals who are willing to hold tight during lean periods will fare better than those looking for short-term gains.
The other upshot of this is that you shouldn’t be reliant on your investments for your livelihood. Don’t go all-in and over-commit, because this is a precarious position that no one should put themselves in. Get expert advice, balance out your portfolio with proven stocks, and be savvy with your budgeting to invest appropriately.
Diversity is important
Speaking of having a balanced portfolio, this is one of the core tenets of investment for the average person. If you only invest in one company, you are tying your financial future to the success of a single business entity. And as we all know, even the biggest brands can be toppled.
There are other financial products to consider investing in, such as mutual funds and ETFs. We don’t have time to delve into these here, but it’s best to speak to an expert and do lots of research so you can weigh up your options and spread your capital between stocks and other areas, rather than taking too much of a gamble.
Volatility is variable
The stock market is always going to undergo periods of volatility, but there are certain companies that are more prone to rapid rises and dramatic plunges in value, while others are more robust and able to weather economic storms.
Usually, it is well-established businesses that are the least risky, and thus less volatile. If you’re not a fan of living on the edge and don’t mind the smaller returns, this is for you. Up-and-coming organizations can be more of a roller coaster ride in this regard, with high risks leading to bigger rewards, alongside the potential for losing out entirely.
Ultimately a beginner in the stock market has to know themselves as much as anything else. Recognize your strengths and weaknesses, and avoid getting into situations that are outside of your comfort zone.
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