For new investors, the stock market can seem confusing or scary. Knowing where and when to invest your money in the stock market can seem overwhelming. These five tips can help you feel more at ease when investing your money in the stock market:
1. More Than Dow Jones
The American stock market is more than just the Dow or any other exchange that’s only comprised of a few select stocks. NASDAQ and the New York Stock Exchange are also common, other smaller exchanges exist in the United States. Similarly, international markets provide more investing options than you may have realized existed. In fact, some of those markets may provide a better return than the one here at home.
2. Many Types of Investments
Individual stocks aren’t the only option you have when it comes to investing. In fact, much of the American market consists of mutual funds. If you look aside from the stock market, you’ll also find bonds and retirement accounts, which can lead to a profit over time. However, stocks tend to offer the best chance at a return than those types of investments. Perhaps this is why 50% of American households invest in stocks.
3. Think About The Big Picture
The stock market is all about your return in the long-run. In the short term, stocks will fluctuate, and this has a lot to do with speculation and attitudes about stocks. In the long run, those fluctuations might be mere blips on the radar. They don’t necessarily matter if the company is increasing in value and performing well in general. Furthermore, your one stock doesn’t paint a picture about the entire market.
Companies do well even when the economy is struggling. Indeed, some businesses only do well when others aren’t. Just keep the big picture in mind, and don’t let the small ups and downs affect you too much.
4. Variation Is Key
What you’ll see in any strong portfolio is variation. Investors who have stocks in different industries have strength. While one industry may weaken for a while, you’ll have something to fall back on. The “Plan B” approach is important in all aspects of finances. Similarly, investing in some global markets can help to offset the loss if one country’s economy isn’t doing so well.
5. Risk Isn’t Everything
People who invest often worry about losing all their money. However, you don’t have to make risky investments for them to pay off. Using a stock market newsletter or online investment recommendations will help you know your risk rewards. Stocks that perform consistently can work for you if you’re patient. Hold on to strong stocks rather than jumping the gun and trading stocks as soon as the market opens.
Anita is a freelance writer from Denver, CO. She writes about finance, business, and home and family. When she isn’t writing, she enjoys spending time with her family and reading a good book.