If you are considering entering the stock market for the first time, it can be quite daunting. We highly recommend that you first invest in yourself and get educated.
You will find many people stop investing after major stock market “crashes” like we experienced with the GFC (the global financial crises in 2007/2008) However, you will learn that markets are cyclical. This is why education is so important, so that you can spot opportunities, when everyone else is emotional.
Here are 5 steps or principles you can follow:
Ensure you invest in quality shares, even if they are more expensive. Rather do fewer investments but concentrate on quality. Quality shares tend to be bigger companies, have more share trading liquidity (more volume of these shares are traded) making it easier to buy or sell at the order price.
SET EXIT LIMITS
When buying a share, it is a good idea to already decide what your exit point is going to be should the share start trading lower than what you bought it for, to limit your loss. Should the share start rising, it is also a good idea to set a limit where you will take profit, in which case you would set your exit point higher as the share price rises. This is to lock in your profit.
DO NOT SPECULATE OR GUESS
Make decisions on actual events. Do not guess or speculate as to what the market is going to do.
AVOID SOFTWARE “SYSTEMS”
There are education and software “black-box” systems sold using high-pressure sales tactics. Avoid these. Whilst software tools are great, you can’t use them to do your stock picking and trading for you.
Instead of spending capital on software systems, rather do research on stocks you want to invest in and invest your capital in the market.
See our article on “spruikers” by clicking here, and how to avoid them.
AVOID MARKETING COMPANIES
There are a number of high-pressure marketing companies that concentrate more on marketing than education, that sell education “systems” that promise huge returns for little effort. Research thoroughly before investing in any of these courses or systems.
Also see our article on avoiding “spruikers” by clicking here.
You can learn more about acquiring stock market investment education and skills by clicking here.
You can view a more comprehensive article on this subject by Dale Gillham by clicking here.