Stock market can be one of the best and profitable types of investment. You can easily invest from your average income. However, the bad news is that most of the new stock investor loss their money in the first couple of week for invests in bad stock or buy in wrong time. There is some other reason to lose money in stock market but for the new investor losing reason pointed in a single point that they have not done their homework well before come to invest in stock market. Most of cases, new stock investor come to invest in market to hear that stock market investment is very profitable but they don’t know the full stories. Just focusing on profit they invest in market and lose in short time. So let’s take a look at the 4 most important lessons for new stock market investors.
Keep a cool head
If you are decide to do invest in stock market, you will need to keep a very cold head to face the most boring plays in stock market that may you can think of. The problem being, most of the people choose this kind of investment to hear classic tale of someone that they doubled in value to buy some share and rich overnight. Off course that is great story but in order to reach in that point to grab the jack pot you will have to play the odds for a long time. In the same time you will need to invest free money which may you not need for a year without any sudden serious reasons. This will make your invest safe because you have no pressure to sell your stock till come in profit.
Adopt the “dollar cost averaging” strategy
The “dollar cost averaging” strategy is basically a type of investment where you only use a set amount of money to buy stocks but you use them no matter what the status of the market is. This way you are forced to buy a lot of stocks when the market is low and fewer stocks when it is high and ultimately you end up having a rich and diverse stock portfolio.
Don’t invest unnecessarily
Most of time people start investing in the stock market in the thinking of somehow earns a huge amount of money from stock market but they do not know how to play in this market. So they believe that the best thing would be to invest it. Think over it, if you do not know what you are doing or if you have not studied the market, it is to be sure you may end up losing all your money or not generate any income with it. Money is your fiend and you don’t need to send your friend out to die in some reckless investments. Study yourself and earn knowledge as much you can before do something.
Study the soap metaphor
Anyone who has ever thought about investing has come over this metaphor by Gene Fama that “money is like soap”, meaning that the more you use it the less you will have. And what this basically says is that you need to allow your investments to mature and not rush to buy when you see that the market is falling and then sell as soon as it rises a bit. The real money is to be made when you plan to invest for the long term and allow your investments to bring back more over a longer period of time.