10 Stockmarket Investment Tips For Beginners

September 5, 2008

Stockmarket investment is one of the best ways to beat inflation and achieve an excellent return on your money. Obviously, if you have your own business, you’ll want to invest in that first but if you’re thinking of additional long term investments, you’re far better off investing in the stockmarket than putting your money in the bank.

Stockmarket Investment Isn’t Gambling: Don’t look at the stockmarket as a way to make short term cash. You need to be prepared to invest your money for at least five years.

Be Prepared To Study: Learning about the stockmarket requires quite a bit of study. If you don’t have the time and interest to learn, consider investing in a managed fund.

Learn The Basics First:
Get a basic book, so you understand the market in general first, before plunging into something complicated.

Reduce Risk By Spreading Your Investment: Don’t invest in individual stocks until you have enough available cash to make it worthwhile to invest in at least half a dozen. You could use a managed fund to build up this sum.

Stock Tips Suck: Don’t take stock tips from anyone – especially folks on investment forums, or from magazines. I’ve visited forums in the past and I reckon a good 90% either don’t know what they’re talking about, or they’re simply there to ramp up shares they already own. And most shares recommended in magazines, have increased in price before the publication hits the stands.

Make Sure You Understand What You’re Investing In: Don’t invest in sectors you don’t understand, or have no interest in learning about. If you do, you won’t understand factors which could affect that whole sector and the company you own shares in.

Reduce Your Risk: Never put all your eggs in one basket – even if you think it is going to be the next Microsoft. I prefer to invest in 5 or 6 different shares at a time. Some people choose more. This will depend on your own attitude to risk. And no matter how great you think a company is, never become emotionally attached to it.

Focus On The Complete Portfolio:
Don’t get stressed or upset if you have to cut your losses on a particular share. It’s the whole picture that’s important. I’ve always found that out of 6 shares – two will do well, two will be mediocre and two will do badly.

Don’t Invest And Forget: Some people will tell you not to watch the stockmarket – just invest and forget. I don’t completely agree on this point. While there’s no point in obsessing over the price fluctuations of one particular share, you do need to keep reading the news for changes in the industry, or changes that may affect the company. This applies to both large and small companies – even huge companies can and do go bust.

Don’t Sell The Prize Pig: If you’re in a position where you need to sell – always get rid of your worst performing shares first. And never sell your best shares to loan anybody money, especially if they want to invest it in a business that’s struggling. (*This was the worst ever investment mistake I made)

Do you have any tips to add? Have you invested in the stockmarket before, or would you consider it in the future. Or are you one of those people who find the idea of stockmarket investment way too risky? Please share in the comments section and feel free to ask any questions relating to stockmarket investment.

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