Stock Trading Tips for Newbie Investors by Anil Sharma

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Stock Trading Tips for Newbie Investors by Anil Sharma
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The current economy has converted the stock market into a shock market for almost everyone. The youngsters or other newbie investors entering the world of stock trading had a still harrowing experience, but they have the luxury of time to their advantage to recoup their losses unlike the older generation investors who have lost their retirement savings.
I trade a little bit - only to the extent that I can afford and have been learning rather quickly on the way. I would like to share my experiences with you if it would help anyone to avoid mistakes that starters normally make.
1. Invest the money in the stock market that you can afford to lose. This does not mean you would lose it, but the stock market is a gamble that no one can predict but there are ways using which one can make decent retirement savings a goal. If you invest with the only money you have and if the stocks plunge all of a sudden, you may not have anything left. Therefore always keep sufficient savings safe with you - away from the stock trading!
2. Understand the stocks before investing. It is not easy to find all the information about a company before investing. The best is to talk about investing in a company to your friends who have been trading that stock. If you do not have anyone, it may be in your interest to use a stock broker to advice you and monitor your investments and help you to reach your financial goals. Do not get your information from forums on Internet. Many people are nice in these forums but many provide suggestions or put out information that caters to their interest. Needless to say they misguide very often.
3. Plan for the long term. If you are thinking of a quick return, there are a lot of chances of getting disappointed. Frequent buying and selling can result in excess losses and have much larger tax implications. Therefore, plan to invest in good stocks and do not keep checking its price every thirty minutes. Stocks in the long term have historically performed better.
4. Keep emotions out. The swings in the stock markets are not for the faint hearted. When it keeps going up, the new starters feel the urge to add a lot of money not realizing why the prices are going up. There are lots of market makers who control the prices to quite an extent. Once the prices are way up, many investors sell off and the prices drop like a rock.
When the markets go down, very often, the new investors panic when they see the prices go down a lot and they sell their stocks to prevent further bleeding, not realizing that the stock would very well come back up in the near future. Selling the stocks in a panic would lock the losses right then.
5. You cannot beat the market. New starters very quickly learn things like "buy low sell high" concepts and they start monitoring the charts looking for opportunity. Waiting to buy at the bottom price or to sell just before it starts coming down again is not a good idea as no one has ever been able to beat the market. Those who do, most often do it just by accident or by using a lot of experience. The safest strategy is to keep investing small amounts very regularly. In the long run, the price averages out and very often end up with modest returns in the long run.
6. Diversify. This one word strategy is the most important aspect of investing. Putting all your eggs in one basket is never advisable. Keep your portfolio diversified so that your gains or losses will be in control. No stock ever performs good always or bad always. Historically, it is seen most stocks perform well in the long run.
7. Keep yourself in the loop. It is a good idea to be in touch with the news about the companies you buy stocks of. If there are indications about a company going south, you might have time to sell off that company's stock in time. My personal strategy is to sell it off even if there is a slight hint about bad performance of a company.
8. Try to learn about investing. There are a lot of ways that people trade. The big shots use futures and options to minimize their risks but these tools are not for the starters. They are very difficult to understand and it is easy to lose a lot of money without proper understanding. So keep learning as much as you can as becoming a successful investor is a long term process.
You can learn more about investing here.
Good luck.
About the Author
Anil Sharma has diverse hobbies and writing about his views and experiences to help others, is one of them.
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