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Investment Tips For Inexperienced Investors
Everyone loves a quick shot at making some money, and some people believe that investing is the way to make money with very little effort. The problem is that investing is not a passive way to make money.
Investors must actively watch and adjust their investments to reach the maximum benefits. Some people spend their money on lottery tickets, and some people choose investment.
If you’re curious about the world of investing, take a moment to enlighten yourself. Check out a quick look at some simple investment tips for inexperienced investors.
Invest in companies not stocks
It’s super important that you choose your investments based on the company, not based on the popularity or a “feeling” you feel. You cannot mix money with emotion if you plan to find true success.
Use the web as a tool to dig up information on a prospective investment. Read the “About” page, like this example shows, and learn more about what a business is really about before you invest your hard-earned money in their cause.
Have a plan for when you panic
Making financial decisions in the heat of the moment is a bad idea. Don’t let your emotions guide you, and preplan for those panicky moments. If you lay out a decision-making process while you are of sound mind, you can use it to guide you through the rough times.
Write out clear reasons for why you would buy a specific stock. What is most important to you about an investment? Take note of these things while you’re relaxed, and go through them when you’re feeling stressed.
Do the same thing when you are considering selling. Write out clear reasons why you might sell a stock before you’re ever in a position to sell. When the tough times arrive, you will have a clear plan of action to follow.
Understand your reaction to risk
Your ability to handle risky situations is extremely influential to the kind of investor you will become. Your reaction to risk is partially based on your genetics, so it helps to know a bit about how your parents and siblings handle risk.
Build yourself a solid foundation
Lay yourself a solid foundation of knowledge. Don’t jump into an investment without first arming yourself with information. Dig up all of the “starter” articles you can find, and read yourself into enlightenment.
For starters, understand P/E ratios, earnings per share, ROE (return on equity), and compound annual growth rate (CAGR). These terms will prove useful along your financial journey.
Diversify your investments
It’s recommended that you only invest around ten percent of your portfolio in individual stocks. The rest of your investments should be geared towards diversification. Spread your luck, and reap the benefits.
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