Stock market for beginners
Investing in the stock market can be complicated business. After all, market forces are complex and hard to understand, much less predict.
Obviously, everyone wants to be on the winning side but unfortunately, most people lose their hard earned money when investing in the stock market. There are many reasons why these people lose money. Here are some of the more common reasons:
Never follow the crowd blindly or believe rumors without investigating
Some investors just follow blindly because they are unsure of what to do. So they buy stocks based on half-truths and rumors and end up losing a lot of money.
Your decisions should always be based on your investment philosophy, and not your emotions.
This is a big mistake. Some investors simply do not know when to cut their losses. They let their emotions get the better of them. As a result, they pour more money into the stock market when they should have cut losses and moved on. This is tantamount to gambling, and should be avoided at all cost.
Complete your due diligence. No one else will work harder than you as it's your own money you are investing.
Some investors are just plain lazy. Even with detailed prospectus and documentation lying in front of them, they just refuse to pick them up and digest the information. The outcome is predictable.
You don't have to be a guru but you do need adequate investment knowledge
Some investors want to make money, but they want to make fast money. So they take short cuts and refuse to improve on their trading knowledge. Instead, they depend more on hearsay and their luck when it comes to investing.
Understand what you should do to improve your investment practices.
Have your Investment goals and have clear strategies to reach them. Write them out, and review them at least once per year. Adjust or amend them when appropriate.
Always determine a rational price for any stock. Buy only at a fair or advantageous price.
If you cannot find good investment opportunities, you should never afraid to have some of your, stock money in cash. Do not feel the need to be "fully invested" at all times.
Never "fall in love" with a stock. If it is a loser, let it go. Do not over-hold any stock just waiting (hoping) for it to get back to even.
Have fun investing. Don’t overextend yourself, and never put money into companies that make or do anything you don't admire.
Always look for companies with the best prospects for long-term earnings growth.
Be aware that over the long term, stock prices follow corporate earnings.
Read, analyze, and do your own thinking always striving to improve your investment practices. Never buy a stock solely on a tip.
Invest in good companies with sound business models that you understand. If you cannot comprehend how a company makes money, you will not invest in it.