4 Frugal Ways To Invest In The Stock Market
Investing in the stock market can be emotionally overwhelming. While you would like to imagine you’ll join the winners, it’s equally possible to experience unexpected misfortune.
The best advice anyone can give you is to understand what you should buy by reading authoritative articles on trading. These will teach you how to think about the business. Learn more about investing strategies at blog.24option.com.
This habit of patient study will give you a good idea of how to evaluate what you buy, how to figure out who to trust, and how to avoid naïve mistakes that will lead you to losing money.
By learning to view investments through the eyes of educated investors, you will begin to see things logically, rather than emotionally and distinguish between researched advice and wild speculation.
Simple or Complex?
On the surface, investing is complex. There are many markets and many ways to figure out market moves. It’s only too easy to become bewildered figuring out where to invest and how to go about doing it.
However, when you look into it a little deeper, you find that the most successful traders have learned to simplify the process. They get good at just a few markets and specialize in only one or two techniques, which they tested out through extensive paper trading. They have learned how to focus and specialize.
Create Your Own Guidelines
With that in mind, here are some dos and don’ts that will help you formulate your own general guidelines.
- Do become a good financial steward
Before you learn how to make money, it’s important to understand how to manage the money you currently have in a sensible way.
This will prevent you from going overboard when the money does start coming in. Usually when people start to double, triple, or quadruple their income at a rapid rate, they can go on a spending spree, making up for all the lean years.
Learning how to be a good financial steward is all about learning emotional balance. When you experience a financial windfall, you’ll learn how to save most of it. When you experience a loss, you won’t panic because you have cash reserves.
Developing a savings plan helps you grasp the fact that market investments are a long-term thing. Ideally, you will be working to earn money that you won’t need to touch for at least a decade. In other words, plan for retirement long before you retire.
Split your money into four parts:
- The money that you earn.
- The money that you spend.
- The money that you save.
- The money that you invest.
Having separate accounts–four different accounts–will stop you from commingling funds.
Ideally, you should have at least $10,000 in your emergency savings account to deal with any surprising life events.
- Don’t listen to your emotions
Yes, people do make money from their hunches. Investment lore is full of fascinating stories about people who knew exactly what to buy and when to buy it in the absence of sufficient data.
In real estate, for example, Conrad Hilton was known for his ability to make intuitive leaps regarding large sums of money that defied logic but that turned out to be uncannily accurate. During the oil boom, J. Paul Getty created a fortune because of his intuition.
What you have to remember is that these iconic figures had spent many years in learning their craft. Their intuition is actually entrenched experience surfacing from their subconscious minds.
As a rookie, stick with research and rational thinking. A time may come when you will get a “feel” for the market and a knack for pattern recognition, but this may take years to develop.
- Do watch out for hustlers
During any gold rush, you will find plenty of people selling spades and other prospecting equipment. In the investment field, you will come across sales people, television infomercials, radio shows, and magazine articles selling you a “system.” Be wary of get rich schemes.
The system can be anything, from software that does all the work for you to a subscription newsletter or membership website that has done all the research for you on the best stocks, exchange traded funds, or mutual funds. Be wary of these “done for you” systems. The greater the hype, the wilder the stories of people making an overnight fortune, the higher your level of skepticism should be.
If you do decide to sign up for a training program, you should still continue to do your independent investment research.
- Don’t try to time the market
One of the greatest myths about investments is that there are ways to time the market. In fact, there is a ton of literature on how to use the right technical signals to discern patterns based on past market trends.
Unfortunately, what often ends up happening is that you read “buy” or “sell” patterns where none exist. In other words, your imagination, fueled by desire, has taken over your perception. In addition, patterns discerned by technical indicators don’t always predict market moves perfectly all the time. Instead of looking to pick winners, research stocks and mutual funds that offer a high probability of doing well based on their company history.
These four guidelines will help you get to the top of the investment mountain and not fall off a cliff.
Photo courtesy of: stevepb
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