Starting your journey with the stock exchange can be very daunting. When a beginner enters into the stock market they are filled with a lot of mixed feelings. There is the Beacon of earning more money and also the risk of losing your investment. As a result, beginners in the stock market face more difficulty in terms of making decisions. In this article, we will focus on 8 stock market investment tips and guides for beginners. So if you are a beginner investor in the capital market, you might find this article helpful.
1. Plan ahead
The very first step for a beginner to start investing in the capital market is to have a concrete plan. If a beginner does not have a proper plan then the decisions will be all over the place. As there are many news and rumours, it is very common for beginner investors to lose their focus easily. When an investor has a concrete plan they can always cross check their decisions with their original plan and modify their strategy. So a beginner investor should have a solid plan before they invest a single penny in the capital market. The elements that should be covered in the plan are the amount of money you are going to invest, the company you are going to invest in, how long you will stay in the capital market and what profitability margin you are aiming for. it is obvious that all of these elements will not go as planned but it will give the investor solid track to work on.
2. Focus on Information Not Rumor
When there is a market, people will talk, and it is very easy to get distracted by all the noise in the market. A good investor knows the difference between noise and information. Information can lead you to making a good decision and making a fortune. In the capital market, if you are a beginner it is important that you can differentiate between rumor and information. Before you consider any information to impact your decision making process, please cross-check it as much as possible. Do not jump on the bandwagon of breaking news or opinions of people and make any decision in hurry. Rather use your rational judgment to reach conclusions while using any information. Emphasize more on the authentic source of information before applying it in your decision for passing it to others. Keep yourself updated with the ongoing news and insightful information so that you are not distracted with false information.
3. Increase Your Knowledge Base
No one can become successful in the capital market only based on assumptions and guesses. A successful investor always has a concrete knowledge base that helps him to make business decisions. For a beginner investor, it is not easy to have a solid knowledge base from the start. Therefore, it is important for the beginner investor to upgrade the knowledge base with proper information and training. There are many training programs available that the investors can benefit from. These training programs will provide them with the necessary skill set to make profitable decisions in the capital market. As a beginner investor one should take steps towards learning and development to increase the knowledge base. Apart from institutionalized learning, there is also scope of peer to peer learning. This peer to peer learning also shed light on practical scenarios that investors face regularly in the capital market.
4. Stay Updated with Industry Information
Are you familiar with the Domino effect? The Domino effect is about a series of events and a reaction of its previous events. It is the effect of one event on several other events followed by it. The stock market is also very prone to get impacted from the Domino effect. A business acquisition or any vital business change can have an impact on the stock market. Sometimes they have a good impact, sometime it’s not. For a beginner investor, it is important to understand the types of information that will impact the capital market. Plus a beginner in the stock market should stay updated with industry information that is relevant to the capital market. Therefore, a beginner investor has to keep himself updated with Indus information in order to make profitable decisions.
5. Invest on Safe Stocks
Once you have the basic elements sorted out while you are investing money on the capital market it is time to focus on the company you will be investing in. For a beginner investor, it is recommended to start with the stocks that are safe. In order to understand which stocks are safe, you can look at the historical performance of the companies. Companies that have generated profit and have provided a good amount of dividend and bonus share to the companies can be considered as safe stocks. Apart from that, there are other variables that can indicate whether a stock is safe or not. To begin with, the historical performance of a company and the growth of the stock in the market can indicate whether a stock is safe or not. Before you put your money on any of the companies, it is better to do your homework and shortlist a few stocks that can be considered as safe and only invest in these stocks for the time being.
6. Invest in IPO
Another opportunity that beginner investors can benefit from is investing in an IPO. IPO is a safe investment option because it is less likely to cost you loss once you invest in it. For a beginner investor who has limited amount of capital, investing in the IPO is a safe option for them. It is very unlikely to suffer monetary loss if you want to invest in an IPO but if there is a fall of indexes of the capital market at some point IPOs can generate loss as well. But to begin with, it is one of the safest options to invest your money in the capital market.
7. Do not put all eggs in one basket
This is a very popular saying of Warren Buffett. He suggested not to invest all of your money on one project or one company because if that company fails all your money will be gone with it. So an Intelligent Investor will diversify the sources where he is investing his money. More importantly, if you are a beginner in the capital market you should be more careful with the money you are investing. So as you start your journey in the capital market do not invest all your capital in one or very few companies. It will be a safer option if you diversify the amount into companies belonging to different industries. It will provide a safe investment environment for you. Just in case one company fails, you will have other companies that can back you up. So as a beginner in the stock market, do not put all your money in one company, rather diversify the investment in different companies.
8. Do Not Rush
Remember the rabbit from the tortoise and rabbit story? He ran as fast as he could but eventually he didn’t win the race, rather the tortoise who was slow and steady was the winner. The stock market is not a sprint, it is like running a marathon. There will be a situation where you will have to speed up and make decisions by taking risks. And there will be situations where you need to just observe and slow your movement. That’s why the capital market is more similar to running a marathon than running a quick sprint. However, the quick return from sprints sometimes is very alluring to beginner investors. As a result they move towards making decisions that might give them a quick return. However it comes with a price of risk. If you are planning to stay on the capital market and make a good amount of money from it then rushing should not be the word in your dictionary. By analyzing the market, understanding the trends and keeping yourself updated with accurate information you need to take calculated decisions and risks. A decision made in a rush or due to sudden change your situation might cost you to lose your hard earned money. Therefore, as a beginner investor in the capital market it is always advised to move steadily and not make decisions in a hurry.
These are the stock market investment tips and guides for beginners that will come in handy for them in making better decisions in the capital market. If you are not an investor yet but planning to become an investor in the stock market, then these tips will also help you to have a clear picture of how a beginner should operate in the market.