A lot of people ask me “Fehl, I’m a beginner, what should I do to invest in stocks?” As I would always answer, you need a basic knowledge about what you’re getting into, you need a goal and strategy. Once you are ready, you need an online broker. If those things sound so mind blowing to you, you just simply need to visit our guides here at Dailypik.
I want to share with you some more things you should know before you invest in stocks which some of you may know already but still you need to be reminded of.
Note that this post is about passive investing and not about active trading.
5 Things You Should Know Before Investing in Stocks
Stocks Make Money
One of the reasons why the rich becomes richer and the poor becomes poorer is because the rich people know how to invest their money. The rich people would rather invest their money in stocks to multiply their equity. Equity is a percentage of your ownership in a company or business. When you invest your money on well established companies, you multiply your money when those companies earn revenue from their businesses. Why? Because you are literally a co-owner of those companies. The rich people know their priorities, they are business and equities.
Investing is Risky
The moment you put your money in the stock market, you should be aware of the risks involved. The financial world, the economy, the companies you invested with could affect the movement of the market. Today, you might lose some, tomorrow you might lose some more. The next day you might double your money. It is very uncertain that is why it is risky.
You should only invest what you can afford to lose. Only YOU (not your financial advisor, not me, not your friends, not Kendall Jenner) know how much you are willing to invest.
Time is Gold
Time is the only necessity we cannot recover when it has passed. That is why when it comes to investing blue chip companies and investing for long term, it is always better to start young. The earlier you invest, the better.
Know Your Target
These are 2 things you must know: Your Target Year and your Target Money.
Target Year – this could be about how long do you want to invest your money in the stock market. Or until what year do you aim to keep your investments? Or what age do you want to sell and redeem all your stocks investments? Some say they want to invest in 10 years, others start as early as 20 and want to encash all their stocks at age 40 while others target year 2030.
Target Money – this is actually what you think it is – your money goal. Hashstag portgoal (portfolio goal), million goals, millionaire goals, multimillionaire goals, financial freedom goals, and passive income goals.
What’s your Target? Is it 5 million at age 20? Maybe 10 million at age 28? Perhaps, 20 million at 35? Envision your goal, it is not impossible to make it come true.
Do Not Panic
Investing in the stock market is not a walk in the park. The market could crash any day or any moment but if you are into long term investing on blue chip stocks, you should not panic. Focus on applying cost-averaging technique and remember your goal which is your target.
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