photo by mikrash
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There are some thing that need to be considered when investing in the stock market. I’ve listed 5 of the things that I learned over the years that are quite important.
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1. Emotions - Letting your emotions get involved while trading stocks will most likely have you make mistakes. Having your emotions take control will lead to certain financial death.
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2. Avoid listening to “great stock tips“ - If anyone wants to give you a stock tip, you need to ask yourself why he/she would be giving you that advice. Trust you own homework, not someone else’s. If they had inside information about a particular stock they would be breaking the law in giving it to you or anyone else.
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3.Due Diligence - Also known as DD’s. You must do your homework and research each company that you invest in. typically you should put about an hour each week for each of your stocks.
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4. Buy Incrementally When you first buy into the stock, you need to know how much of a percentage of your portfolio you will allocate to that stock. Only purchase 1/2 of your position at first. Wait for a pull-back to buy the rest, but only buy 1/4 position at one time. The reason for that is that if the stock pulls back any more you can buy the next piece at an even cheaper price.
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5. Exit Strategy Just like in case of a fire, you need to have a plan. If you do your homework and keep an eye on the companies that you invest in, you’ll be aware of when the fundamental change and the company is not as sound as it used to be. When you get into a stock, you need to make a decision of how long you’re willing to wait for your gains or how much you’re willing to lose before you cut you loses. That also includes you knowing when a stock has reached it top before a big pull-back.