The Basics of Stock Trading: Facts Every New Investor Should Know

The following is a guest blog post:

If you’re new to stock trading, you’re in the right place. You’ve probably already heard stories about how someone you know turned a small investment into a huge windfall and might want some of that for yourself. While these big gains are sometimes possible, they are still quite rated and shouldn’t really be what you’re getting into investing for.

However, if you want to try and achieve some long-term financial gains and move towards more sustainable growth in your passive income – investment could be for you. In this article, we’re going to look at a few different things you need to look at if you’re new to investment, so you can make sure your money is secure and your goals are achievable. Let’s have a look at the info:

Stick to long-term goals

Too many people get into stock trading thinking they can double their money in a couple of years. While there might be the odd success story like this – they’re super rare, so get them out of your mind. Your goal should be achievable, and it should be over a longer period of time.

While there are many “day traders” who make money off of the fluctuations that happen over 24-hour periods, this is often a full-time job and one that comes with a lot of risks. For someone new to the investment you should steer clear of this sort of trading and stick to something that’s going to earn you money over a much longer period.

Make sure you have realistic earnings in mind

Again, this ties in quite well with the previous point – you need to make sure you’ve got realistic earning goals as well as real-time goals. Your aim with investment should be to make a slightly better return than if you just left your money in a savings account – not to suddenly get rich overnight. That means you should be happy with a 7-8% yearly return on your investment as a sustainable way to grow your cash. That also means that you shouldn’t expect too much from your investments. The higher yield you’re after – the more risk you might need to take.

Do your research and planning

Don’t just dive in and pick stocks just because you’ve heard of them. Make sure you’ve done plenty of research and planning before you invest your own real money. You could start by “paper trading” which involved following stocks with pretend investments and seeing how they go, without risking any actual money.

Make sure you do lots of research online and check different investment magazines and newspapers. There’s a lot of jargon thrown around that can be off-putting to newcomers to investment, so take your time and make sure you understand the industry fully. Lots of people struggle when they first get into investment as they don’t fully understand what they’re doing or what to invest in – so proper research is a must.

Look at dividend and share prices histories

When you start doing your research, you’ll want to look at as much history of each potential stock as you can. You can find this all online. Don’t just look at how much the price has risen or fallen, but pay close attention to dividend payout history – both how often and how much. While you’ll want the share price to go up over time, these dividends should make up a large portion of your yield and could give you some nice lump sums as a bonus or to re-invest.

Make sure you know what fees you’ll be paying

Depending on where you start investing, you’ll need to make sure you’re fully aware of how much you’ll be paying in fees. Some services have one flat membership fee and then don’t charge for each trade, but these might be far more volume than you’re looking for. Other services will charge a percentage on every purchase.

You’ll need to work out what works best for you depending on how much you’re investing and how many trades you think you’re going to do, as this sort of information will affect whether a flat or percentage payment system will make the most sense for you.

Stick to reputable advisors

When looking for advice on what to invest in, there are tons of people you can find to help you. While many of these are useful, many also aren’t. There’s tons of misinformation out there, and people who think they know what they’re talking about but are really just guessing. So make sure you stick to reputable advisors and only rely on people that you sure know what they’re talking about.

Don’t take too many risks

Again, this ties in with our earlier points – risk-taking isn’t part of a sustainable investment strategy. If you want high-yield returns, you’ll have to take higher risks, and that’s not really recommended for someone new to investing. Stick to solid stocks that have decent returns but aren’t likely to face too much trouble.

Use fund managers if you don’t know what you’re doing

If you would rather sit back and let someone else do the hard work for you-you could sign up to one of a number of fund management services. These investors will invest in a range of stocks to build your portfolio depending on your requirements and risk aversion levels. You can check their history and see how much they’ve been earning for other clients. Make sure you do your research fully and only use the best fund managers available to you. The great thing about these fund managers is that you can sit back and count the money without doing any of the day-to-day research that comes with it. These funds will charge a free, but this is normally outweighed by what they can help you earn.

Rely on a reputable share trading platform

If you are going to trade yourself, make sure you use a reputable trading platform that has everything you need. You might also want to start using other ways to invest on specific platforms, like when deciding what stocks to short.

2 thoughts on “The Basics of Stock Trading: Facts Every New Investor Should Know

  1. Simply yet highly effective post! I can resonate with all the points that you made and from my own experience I can say that when you can keep your cool through market dips, and add to your positions at those times, you’ll do great!

    DI

    • Hi DI,

      I always say, “Tune out the noise.” By not reading every dire prediction on the market you can maintain your cool and be level headed and take advantage of those dips when they inevitably come.

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