Investing in stock market can be both confusing and exciting for beginners. We may not feel very comfortable initially, and although there is no perfect way to start investing, a few “don’ts” can actually help us figure out an easier path.
Do not wait for the perfect opportunity to present itself – There is no perfect time to enter the stock market, so just start! There are apps available for us, where we can learn and practice before we actually start investing. So there is no need for procrastination.
Do not invest randomly – Researching is the key! Before investing our money in stock market we must make sure that it is worthy of holding our money. We can start with articles, journals, and we can also discuss with experienced investors. We need to study the stock market and figure out which stocks are undervalued and which stocks are overvalued. This again, comes down to what kind of risk profile and financial goals we have.
Do not forget to diversify your portfolio – We mistakenly equate the concept of “diversification” with “owning a lot of different stocks”. However diversification is not just having number of investments but is varied by the types of investments. We can invest in different kinds of investments like bonds, Mutual Funds, ETFs etc.
Do not invest based on emotions – Avoiding our emotions and excluding them from our decisions can be very difficult but is necessary when it comes to investing. When we invest in the longer term, we need to be patient even if the investment goes down in the shorter term. If we follow our emotions, we may end up selling during the dip and buying during prolonged bulls.
Do not forget to track your investments– We need to keep a track of our investments. We need to update ourselves regarding the financial health of the companies we have invested in. This information allows us to reassess our investments. Keeping abreast of our own finances is crucial even if we have hired people to help us.
Do not over invest – It is very important to know when we need to stop. Investing too much, especially you are leveraging, might do more harm. Setting a budget and sticking to it would help us go a long way.
