With the recent GameStop phenomenon sweeping the headlines, amateur investing is rapidly growing in popularity. But is it right for you? Here are some helpful tips that cover the do’s and don’ts of investing as an amateur.
Why Consider Investing?
There are many ways to help your bank account grow. Whether it’s as simple as contributing to a money market savings account or more complex concepts like investing in the stock market, it’s possible to make money off of the money you already have. Even if you’ve never participated in any kind of investment plan before, it’s easy to get started if you know where and how to begin. And here’s the best part: you don’t need to be a millionaire to potentially watch your money multiply! By learning the basics of investing, budgeting what you spend, and being clearly aware of the risks involved, investing as an amateur could be a very successful venture.
Investing in a Nutshell
The purpose of investing is to put money aside so that it will increase in value and volume in the future. You want your hard-earned money to work for you, right? Think of investing as a long game: you’re putting money in now so that you can reap the benefits later. Most people invest in things like stocks with the expectation that those stocks will increase over time, and they’ll see an impressive return. However, it’s important to note that not every investment will bring you a profit. In fact, some stocks could tank, causing you to lose money. Keep in mind that when you’re investing as an amateur, do be patient and give your portfolio the time it needs to grow.
The GameStop Phenomenon: Why Does it Matter?
Even if you’re brand new to investing, you’ve probably heard about the recent stock market news regarding GameStop, Reddit, and Robinhood. But why does this matter if you’re looking at investing as an amateur? It’s because people who’ve never put money into the market started investing in droves. This sparked a revolutionary increase in new investors participating in something they’ve never done before. While there’s no guarantee that buying stock in GameStop (or any other company, for that matter) will make you rich, the phenomenon served as a great example of how even the most amateur investors can start investing. If you’re curious about jumping on the bandwagon, remember to choose your stocks carefully and start out small. Don’t buy a ton of stock just because it’s trendy – especially if you’re not willing to potentially lose the money you invest if the stock takes a hit.
Trading: Is it Right for Everyone?
Trading refers to selling stocks you’ve purchased and cashing them in or trading them for new ones. Many traders cash in on their stocks to get immediate gains and increase their bottom line. While some day traders may stand to make quite a lot of money, this practice isn’t for everyone, particularly not for those investing as an amateur. Trading offers short-term gains that can be pretty impressive when they are successful. However, if you’re not an expert in this space, those gains can quickly turn into losses. If you’re new to the stock market, don’t participate in pricey trading until you’ve gained experience and feel confident about the risk. Remember that trading is not the same as portfolio-style investing, which is much more focused on long-term gains.
How do I Start Investing in The Stock Market?
If you want to start investing in the stock market and/or trading, it’s still possible to do so when investing as an amateur. Here are some tips to help you get started, and how to know when to buy and when to sell.
• DO start investing and/or trading by opening a brokerage account. This account will hold your investments, and you can use it to track your progress and make your trades.
• DO set a defined investment budget so that you don’t go overboard and spend all of your money just on trades. It’s crucial to have an emergency fund set aside in a separate account before you even think of trading stocks.
• DO learn which stocks are doing well and which ones to steer clear of. You can even practice through a “virtual trading account” so you can try it out before you take the plunge.
• DO buy low and sell high. Track your investments and wait for dips to buy and jumps if you want to sell.
• DON’T assume that every stock you buy will gain a profit. Learn about the benchmarks set forth by the S&P 500 and NASDAQ index, then use this as a measure for your gains (aka profit) so you know which stocks are worth cashing in on and when.
• DO remember that investing and trading are a risk and that you won’t always come out ahead. It’s smart to start out small so that any losses you experience aren’t as painful as going all-in.
Investing and Trading Warnings
Now that you know a little more about investing as an amateur, this process comes with some important caveats. Remember that if a hot stock sounds too good to be true, it probably is. It’s tempting to follow the herd, but it’s not always the best method. Ideally, you want your investment portfolio to grow, which means you should be patient and give it time to really watch it flourish. Be aware of trading scams – you can refer to the SEC website for the latest investor alerts and bulletins. Short-term trading also comes with risks, so it’s important to remember that you might not always come out with a profit. Investing can be fun, exciting, and could potentially give you meaningful gains – if you understand how the market works and how to use your money wisely.
References: [http://learn.advfn.com/index.php?title=Warnings_for_New_Investors] [https://www.sec.gov/investor/alerts]
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