According to Statista, more people had started to invest in stocks, especially after the pandemic. A stock market can be defined as an online place where investors can buy and sell stocks and other assets to earn income.
You’ve undoubtedly heard about markets crashing and people freaking out about their investments, but that’s not what the stock industry is all about. It’s a long-term investment that even you could give a try, so if you’re curious where to start, here’s a short guide on stock trading for beginners.
Table of Contents
Do make research
So, you want to invest in stocks but don’t know where to begin? Well, the internet is your friend, where you can find all the information you want, be it written or spoken. This industry is not the one that you’ll catch up on as you go, so there are a few basic things you should be able to grasp, like:
- What is a trading account, and how to open one;
- How to read the market (and identify the indicators for shares traded, change direction and price traded);
- How to analyze the market (technically, by earning per share, by return on equity and more);
- Trade practices (day trading, position trading, swing trading and scalping are the most known practices);
Trading is like a chain of actions; therefore, each step is done with a purpose, and you need to know why some of them are done in a certain way. Of course, you can’t say why the market is changing on the spot, but you may know what’s best to do in most situations.
Don’t invest blindly
The biggest mistake as a trader is to invest blindly, without considering some crucial factors and knowing a little background on the companies you’d like to invest in. Furthermore, avoid investing in free tips or recommendations that you receive, no matter the promises of making you rich. And remember that if you experience FOMO (fear of missing out) about losing good stocks, and as a result, you trade without doing your research, you might lose money and get into a pitfall, so try to control your emotions when trading at all times.
Do start small
When investing, try to start small and don’t overestimate yourself. It’s important to gain experience in the long run and get used to some trading strategies, so the best thing to do is get a stock tracker. You’ll have one single place for your stock portfolio, connecting transactions with your broker and managing your balance and equity investments.
On delta.app, you’ll get the latest information regarding the stock market, along with popular stocks, cryptocurrencies, funds and other options. With an app, you can have a broader picture of the market where you’re provided with a dynamic portfolio tracker to be on top of your investments. Finally, you’ll enjoy real-time smart notifications with the latest changes to the assets you’re following.
Don’t have unrealistic expectations
Regardless of the stories you might’ve heard about people becoming rich overnight from investing in stocks is mostly a myth. The purpose of trading is not to become the next millionaire in your country but to build savings and maximize income. Meaning that trading can make a difference, but in the long run, you need a lot of patience if you want to see good results. We know that the present weighs more, but you also don’t know what the future holds, so it’s best to start trading as early as possible.
Do build a stock portfolio
A stock portfolio is where you have your invested assets (stocks, bonds, mutual funds and exchange-traded funds). An investment portfolio can help you achieve your financial goals since it allows you to earn compound interest. Here are the steps needed to create it:
- Decide if you need help or build the portfolio on your own. You can ask for a financial advisor’s help or have a robo-advisor do the work for you inexpensively.
- Choose the account that will fit your goals. You can find different types of investment accounts. For example, an IRA is meant for retirement, while regular taxable brokerage accounts are better for non retirement purposes (like a down payment on a house).
- Choose where to invest. Based on your risk tolerance, look for the bonds, stocks and mutual funds suited for your level of investment.
- Determine your asset allocation to split up your portfolio.
Common types of investment portfolios
- Conservative portfolio: keeps your risk low to preserve your investments. It’s used mainly by older investors who don’t want to risk losing their capital.
- Aggressive portfolio: provides shares of companies that are growing at a fast pace but are not yet profitable. It’s usually more appropriate for younger investors who don’t mind taking risks.
- Income portfolio: focuses on acquiring reliable income, like assets from dividend stocks. Retirees choose this type of portfolio to ensure a retirement paycheck.
- Socially responsible portfolio: allows investors to grow by giving their investments back to society.
Don’t take unnecessary risks
Trading is not like a video game; it doesn’t have fixed rules because the market might fluctuate due to various reasons, like:
- Demand and supply. If the demand is high, more people will buy stocks, and the price will increase. On the other hand, if the demand is low, the price will decrease.
- The confidence of investors. If the company that someone wants to invest in is having trouble, the investors will sell their stocks, and the market will fall. Additionally, if the investors are confident, they’ll sell less of their assets, which usually pushes prices up.
- Certain global events. Through the pandemic, investors were more uncertain than ever to make a move, leading to stocks being sold to plunge in value.
Final thoughts
The stock market is not new for people, but it has become more used as it provides an additional source of income, and it’s not as risky as it looks. You just need to make the research and start small with the investments.