4 Stock Market Investing Tips For Beginners
What are some stock market investing tips for beginners?
- Invest as soon as you are ready
- You have to take some risks
- Do your due diligence
- Choose a stockbroker
Investing in stocks is one of the best ways to build long-term wealth through capital gains and dividends. According to one of the most successful businessmen and investor Warren Buffet, one can think of stock market investing as “laying out money now to receive more money in the future”. However, it can also be incredibly complicated and risky when done wrong. This is primarily why the top stock market investing tips for beginners involve plenty of planning and researching.
Investing in the stock market involves buying and selling shares of ownership of a company. Keep in mind that it is not a get-rich-quick type of scheme. If you want to minimize your risks, you need to do your due diligence and learn the top techniques for building your portfolio.
The good news is if you never learned how to invest in Philippine stocks before, you can use time-tested techniques from the best personal finance podcast in the Philippines. This is the place to be for stock market investing tips for beginners because finance professionals share how to maximize your returns while minimizing your risks. Check out these tips below.
Invest As Soon As You Are Ready
The biggest barrier to investing in the stock market as a beginner is getting started. For people who are young, it would be best to invest as early as possible because time is on their side. However, the same rule is applicable for all: anyone who invests should always cover the basics first. This is because investing means making choices about what to do with your finances, which carries a certain degree of risk.
Before investing, you should make sure your daily finances are secured. You might have enough money for investing, but do you have enough money for daily expenses? As a general rule of thumb, you must be able to build an emergency fund that equates to three to six months of expenses and pay off high-interest debts (e.g., personal loans, credit card loans).
For instances of unexpected financial distress such as a job loss, reduced income, or an illness, you will still have emergency funds to use. The last thing you would want is to stop investing because you don’t have enough money to cover your living expenses. In the same way, it would not make sense to invest if you are paying a higher interest rate than what you are earning from your investments.
After you settle these daily financial concerns, you should look into what stock investments make sense for you and what are your investment goals. Think about how long you are planning to invest and what you expect from it. Take note that there are different types of stocks. Study which stock you think you can grow with. Remember that investing without planning can result in wasting your money.
You Have To Take Some Risks
Before you commit your money to the stock market, you need to determine how much risk you are willing to take. Stock market investing involves risk, including the risk of losing capital.
Investors with a high-risk tolerance, also known as aggressive investors, could lose substantial or all the amount they invested. However, they also have a higher chance of earning more than low-risk investors. If you are an aggressive investor, your goal is to maximize capital growth. You should be willing to take on losses as you have a long-term investment horizon.
Second, investors who have a moderate risk tolerance prefer reducing risks and increasing returns equally. If you are a moderate investor, you are willing to accept some degree of market volatility to have a long-term return.
Lastly, conservative investors generally try to avoid stocks that fluctuate too much in value. If you choose to become a conservative investor, you will be willing to settle for low investment returns as you do not want to risk losing your principal investment.
Do Your Due Diligence
When it comes to stock market investing, doing your due diligence is essential. That means researching every stock before you buy it.
Know about the different stock companies in the Philippine Stock Exchange. You can access different information about publicly traded companies such as sectors, quarterly revenues, expenses, and more. Make sure to familiarize yourself with these documents to create smart investment choices. For example, if you find out that a company has failing revenues and high debt according to the quarterly report, you will be informed of the risks involved in buying shares from that company.
A strategy done by most stock market investors is technical analysis. They look at stock price charts and try to identify patterns, checking when is there a good buying and selling opportunity. To do this, you need to gain a solid understanding of the factors that affect the stock market.
Choose A Stockbroker
It’s not possible to buy and sells stocks directly from the exchange on your own. You need middlemen known as “stockbrokers”. These accredited individuals or companies facilitate the buying and selling of stocks on behalf of investors.
There are traditional and online stockbrokers. Most traditional stockbrokers work for brokerage companies and execute trades for you through calls. On the other hand, online stockbrokers allow their clients to sell and buy stocks through their web-based trading platform.
For beginners in stock market investing, choosing to go for online stockbrokers is a better choice because it offers easier access to stock reports, real-time stock market details, portfolio management, and order placing.
Investing in the stock market is one of the best ways to build wealth. If you are just starting, make sure you understand that the best stock market investing tips for beginners will help you get the most out of your investments.
Need more stock market investment tips? Listen to the best personal finance podcast in the Philippines — Leadership Stack. Every week we invite local and international professionals who provide time-tested advice on how to best invest in the stock market. Click here to start tuning in!