Let’s get one thing straight, investing in the stock market is never risk-free. The stock market is an investment instrument and your money can easily go down the drain if your lacking important knowledge or don’t do your research before making investments. This post can be used as a tool to learn how to invest in the stock market and increase your chances of growing your investments.
How to Invest in the Stock Market With Fewer Risks
1. Buy Dividend-Paying Stocks
Aside from stability, blue-chip stocks are also dividend-paying stocks which can give you extra money to reinvest or withdraw. Another advantage of dividend-paying stocks is that they enable you to participate in capital gains, which is a separate means of receiving income. So be on the lookout for dividend-paying stocks. There is usually a section in your online dashboard where you can see companies who are about to dish dividends.
2. Don’t Buy One Stock in Big Quantities
Once you get on board, chances are you’ll look for predictions on which stocks will increase in value the soonest. You’ll want to make sure that you don’t put all of your eggs in one basket. Not only does avoiding this enable you to diversify your portfolio, but you also lessen the chances of significant loss of your overall investments. You never know how much that stock will fluctuate the next month, so buying conservatively can be a smart move.
3. Be an Opportunity Buyer
Regularly investing in the stock market can be appealing, but there’s a more efficient way to invest while maximizing your earning potential. Instead of routinely buying stocks regardless of price, try buying when your desired stock is at a relatively low price. This way, you have the potential to earn more when the stock’s price starts to increase.
4. Lock in Your Profit
When your stocks are finally earning, you start to ask yourself when you should start selling. It seems simple enough, right? Buy low, sell high, leave with a profit. However, it’s rarely this simple and very few people ever buy at the ultimate low and sell at the peak high. Check out this article for some selling tips and common mistakes that can hurt you in the long run.
5. Do Not Buy and Hold
Generally speaking, if you’re in a bull market, the majority of earnings on a stock happen in the first year or two. As a rule of thumb, says David Saito-Chung on Investor’s Business Daily, “profits should be taken when a stock rises 20% to 25% past a proper buy point.” Of course, there are many exceptions and you need to be up to date on your specific investments and trends in order to make an appropriate decision to sell your stocks.
6. Check the Stock’s Support and Resistance Line
Though this might not be for beginners, it is best to learn as early as possible. If you look at a stock’s performance, you can toggle several options like its historical performance and the support and resistance line. What is this exactly? The support line indicates how low a stock value can get. Meanwhile, the resistance line indicates the stock price’s ceiling. What does this mean for you? This will serve as your signal of when to enter and buy your desired stocks.
7. Do Your Homework
This may sound trivial or repetitive, but you should always be well-informed concerning where you put your money. No one is going to look out for your investments they way you will. You should check a company’s financial status, market capitalization, and future projects that will affect its growth. Doing so will give you a huge leg up compared to others who only follow forecasts.
Watch this video by Ryan Scribner to learn more about the basics of stock market investing:
Now that you’re equipped with the basic knowledge on how to invest in the stock market with low risk, sign up with a trusted stocks broker to get started. There will be times of doubt, but it’s okay to be cautious as you invest. As a last reminder, investing in stocks will always have its risks, but with proper research, the risks will definitely be minimized.
Do you know other tips on how to invest in the stock market without incurring too much financial loss? Share your thoughts in the comments below.