Article by Vintage Value Investing
As you probably already know, investing in stocks can be a wonderful way to make an income. Nevertheless, there is undeniably some risk involved with investing. If you’re not careful and do not take the appropriate precautions, you could very well end up losing your money. The risk is far lower than gambling your money away at the casino, but you should still proceed with caution. Below, you’ll find tips for investing safely and wisely.
1. Perform Research and Ask Advice
First and foremost, ordinary investors need to realize that they’re not institutional investors. You probably have limited experience in stocks and this can make it difficult for you to make the right picks in the beginning. Researching the underlying company and their financials is absolutely pertinent. Simultaneously, you should consider asking advice from a professional. Make sure you’re making decisions that are recommended. If you act haphazardly, your money is already gone.
2. Use Stop Losses
Stock prices can fluctuate from day to day and minute to minute. A little fluctuation is normal, but you should be very cautious about substantial price drops. The company may have released terrible news that has sent the stock price plummeting. Unless you want to lose your money, you need to pull out immediately. However, you’re away from the computer and cannot access your brokerage website.
This is where the stop loss enters the picture. By setting a stop loss, you will be able to ensure that the stock automatically sells when it has hit a certain level. This is a good way to ensure your losses are minimized. Alternatively, the stop loss can be used to secure gains.
3. Look For News And Not Price
Some people will drive themselves crazy looking at the stock price day after day. When it comes to investing, returns are always related to risk. You can learn more about that by clicking here. However, you should keep your nerves at bay. It is not always a good idea to check the price so frequently. If you do, you’re going to go insane and you may even make a bad decision based solely on emotions. With this in mind, it is best to keep an eye out for news, but not price.
Check out the news related to your specific tickers (you can even set up Google Alerts for the companies in your portfolio) – but only check out the stock price once or twice a week. This will help you avoid making irrational decisions based on your emotions. Checking the news will ensure you’ll be more likely to lock in gains and avoid losses.
4. Don’t Go Overboard
Another thing to remember is that you’re not going to become a millionaire overnight, so you shouldn’t even bother. Instead, you should simply do your best to avoid getting into trouble. Investing too much will potentially come back to haunt you in the future. It is best to only invest money that you can afford to lose. Investing can easily be just as addictive as gambling. Therefore, you should set limitations for yourself to prevent overdoing it and getting yourself into deep, deep trouble.
For more tips on investing, be sure to check out: The Ultimate Guide to Value Investing