(Article Written by Oscar Wilkinson)
Effectively investing in the stock market takes time, experience, knowledge, patience, and the confidence to invest money in what can be an extremely volatile market. That said, it’s not surprising to learn that few millennials are bold enough to risk their hard-earned cash in stocks. A survey featured by Business Insider revealed that only 1 in 3 people aged 18-34 invest in stocks.
The fear of risk in investing is understandable for millennials, given that this particular generation has experienced the 2008 market collapse. However, investing in stocks can be a lucrative opportunity to generate revenue for the short and long-term. Also, millennials possess certain qualities that make them a perfect fit for investing in stocks, such as a high affinity for technology, and the fact that they are still young and therefore can learn from their mistakes.
All millennials should invest early in order for their assets to experience growth. If you’re one of the bold ones, consider the following tips to give yourself a head start in investing wisely.
Determine your goal and timescale
Are you investing to get big returns after a few months, pay off a huge debt, or maybe give yourself a really comfortable retirement? It’s essential to determine your investment goals early to be able to layout your strategies accordingly and decide how long you plan to stay invested in the stock market. There are several ways in which investors can make money on the stock market: the initial dividend yield on cost, the growth in intrinsic value per stock, and finally, the change in valuation applied to a company’s earnings, which are measured by the price-to-earnings ratio. We published an article on Quantified Strategies explaining how to make money through day trading, and every new investor can give themselves a good grasp of how to trade stocks by reading it. Just remember that your mindset is just as important as your trading strategies so be focused when learning different strategies.
Keep yourself informed
In investing, there’s a strategy called fundamental analysis, which involves keeping yourself up to date with economic factors that may affect the economy. Nadex’s educational course page on fundamental analysis, states that it’s wise to look not only at the charts but also the news when making important trade decision. That’s because news is the fastest way to know if the prices of a certain stock will rise or fall. For example, if a report shows that crude oil is oversupplied, will you keep most of your oil stock investments? Of course not, because an oversupplied commodity means that its prices will drop. Listen to the news often, and keep yourself informed so that you can make sound trading decisions in relation to market behaviour.
Cut losses, let profits run
Human psychology suggests that people tend to hang on to their losses longer than they should, which makes it difficult to move on and let other things flourish. This is the same reason why many people find it difficult to invest in the stock market – nobody likes to lose. However, this mentality is exactly what you must let go of to succeed. It helps to follow stops and limits, where you set the value you are willing to risk and the amount you aim to gain. Investor’s Business Daily suggests selling a stock when it’s down 7% – 8% on its purchase price. This will eliminate holding onto losses too long, and allow profits to augment.
Investing in the stock market is a great way to build wealth, which works for those willing to be consistent savers. The younger and earlier you begin investing, the greater the final result.