While the stock market is filled with uncertainty, certain tried-and-true concepts can boost your odds for long-term success.
The first thing any investor should identify their financial goals, for example, saving for retirement, purchasing a home, or funding your children’s education. This will help them determine how much money to invest and which types of investments best suit their situation.
It’s also an excellent idea to focus on creating an emergency fund and paying off high-interest debt before putting your money into the market. If you do have funds to put into the market, start with a small amount and gradually increase your investment as you gain more experience.
Keady says that one of the most common mistakes made by beginners is to try and time the market. «Nobody is able to pinpoint the ideal moment to jump in,» she adds, noting that the most effective strategy is to make an investment that will last for a long time and stay with it through the tough times.
When you’re first starting out, you should focus on stocks from companies you are familiar with. As the famous Fidelity Magellan fund manager Peter Lynch famously pointed out that you have a greater chance of winning by betting on companies with a solid track record and solid growth prospects rather than trying to predict the future.
It’s also a good idea to stay clear of websites and advertisements that promote sure-thing stocks. In many cases, they are part of a scheme known as a pump and dump that involves shady individuals buying shares in a thinly traded company to increase the price and then dump their shares to make money.