Stock market investments are to be done with detailed planning and extensive research. There is a simple procedure which you need to follow to earn well through securities. This article on how to start investing in stocks will serve as a perfect guide for you in the world of capital markets.
Equities are believed to be the best asset class by many investment advisers. There are many reasons why experts have arrived at this conclusion. Over the years, the returns given by equities have easily surpassed those of the conventional forms of investing such as deposits and gold. The only thing that matters is whether you invest at the right time and in the right company. Given below are some useful suggestions on how to start investing in stocks.
Decide How Much You Can Invest
There are many things which you should consider before you arrive at the figure which can be invested in stocks. Here are the things to be taken into account:
- General household expenses
- Rent, if any
- Loan installments
- Insurance payments
- Retirement plan premium
After all these expenses, the amount which remains can be invested into the markets. This will help you to avoid unnecessary risks as there is no fixed timeline for returns from equities.
Understand Company Fundamentals
Understanding the company fundamentals is the second step. You need to study balance sheets, profit and loss accounts, cash flow statements, annual reports of the companies which you are interested in investing. Look at whether the management is committed to achieve their set targets and their past track record in executing projects. You can also listen to fundamental analysts call on certain stocks and sectors, as they have good experience in analyzing company business model.
Understand Company Results
Technical analysis is important for short-term as well as long-term investors. This kind of analysis helps you to know whether you are buying right stock at the right time and in the right quantity. Technical chart analysis is very useful to know the support and resistance points for stock price. From this data, you can also decide what your stop-loss should be for any given stock. Stop losses are fixed with the stock broker to exit from your positions at a level, below which you fear there might be a vertical fall in the stock price.
Understand Investor Sentiment
Market sentiment or investor sentiment plays a crucial role in deciding where the markets will move. You need to stay away from the markets when there is negative news about the economic growth and the investor confidence is low. This is because low investor confidence leads to lack of buying and, as a result, there will not be any substantial appreciation in stock price.
It is a misconception that all stock market investors are cash rich. There are many investors/traders who trade with small amounts and make good money for themselves through their talent and ability. Here’s an example of how you can invest $10,000.
|How to Invest $10,000|
|Banking and Financial Services||25%|
|Oil and Gas||15%|
|Media and Entertainment||15%|
Patience and self-confidence is the key to succeed in the market every time. So try your best and make good money. All the best!
DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions.