Although the stock market is filled with uncertainties, certain tried-and true principles can increase your chances to long-term success.
Investors must first establish their financial goals. For example, saving for retirement, buying a home, or funding the education of your children. This will help them decide the amount they should invest in the market, and what kind of investments make sense for their situation.
It’s also an excellent idea to focus on having an emergency fund in place and paying off debts with high interest before putting your money into the market. Start small and increase your investments as you become more experienced.
One of the biggest mistakes that beginners make is trying to anticipate the market, Keady says. «Nobody knows the perfect time to invest,» she adds, noting that the best way to invest is to make an investment for the long run and stick with it even through the tough times.
When you’re just beginning out, you should focus on stocks of companies that you know. As the famous Fidelity Magellan fund manager Peter Lynch famously said that you have a greater chance of winning by betting on companies with a proven track record and solid growth prospects rather than trying to predict the future.
It’s recommended to stay clear of online forums and advertisements promoting sure-thing stocks. They’re often part of the pump and dump scam, where shady individuals buy buckets of shares of a shady company to push the price up, and then sell their shares to gain their own gain.