Shake Off the Inhibitions and Get Started in Stock Trading
Getting started in stock trading isn’t as hard as it seems, and though doubts are in your mind, we’ve cleared some of them.
The stock trading buzz seems to be everywhere and it’s seen in the increase in trading resources online. Online trading brokerages have made stock trading so much popular, it is no longer a niche activity.
You’ll find so many people wanting to start trading. Some of them would dream of ending up as a celebrity investor like Warren Buffett. Others would just want to get an extra source of income. Some of them would have a long-term perspective and would want to invest in stocks to prepare for their retirement or their children’s higher education. Whatever the goals or the requirement, you need to better understand the ways markets work and the fundamental factors that make a stock valuable or less worthy. What you also need to figure out is whether the stock is suited for your investment goals. For that you must set clear goals in the first place.
It Could Be Quite a Reliable Source of Long-term Wealth
In fact, though there are many vagaries in the stock market, it can prove to be quite a reliable manner for creating long-term wealth, according to Motley Fool. In fact, over significant time periods, stocks can generate around 10% worth of annualized returns. That means, the money you invest could increase significantly by around 20, 30 and 40 years. Sometimes, your stocks could be really efficient and even beat or surpass the market average. If you pick stocks like that, you could be earning a lot more in the long term, making you very rich.
Questions You Must Ask Yourself
As we said before, you need to decide why you wish to invest. What is your objective or goal in trading? How much time and money can you spend on investing? Without figuring these things out, we wouldn’t advise you to start trading, because there is a possibility you could fail to earn as much as your potential or, worse, end up nowhere. But we failed to include the most important question of all – how much risk you can tolerate? There is an innate risk involved in stock trading since there is a bit of unpredictability involved. But all these can be managed if planned accordingly. That’s why you need to set your investment goals well before you start your stock trading endeavor.
Go for Less Risky Stocks if You’re Thinking Long-term
If you’re planning for the long term, such as your retirement, you’d be less inclined to buy risky stocks. It is important to understand that stocks that grow astronomically in the shortest period of time also have the tendency to fall spectacularly. They can be unpredictable. For someone who wants to make quick money or become rich quickly, investing in such risky stocks would make sense because he/she would take the earnings that keep rising but would be equally prepared to bear the risk if the stock falls flat. But when you have serious long-term goals to meet, such as retirement or kids’ college education, you can’t afford to take risks. But with time on your hands, you can invest in stocks that grow slowly but steadily.
Also make sure you have an emergency fund set up to cover for unexpected expenses that turn up. And remember, you don’t necessarily need to start with a great deal of money. When you start, you’ve got online broker dealers offering commission free trading. In any case, commissions have reduced significantly. So some hundred dollars would be all you need to get started.
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