Investing in the stock market offers the perfect opportunity to make a lucrative income. While some guys may have the luck when it comes to the stock market, earning revenue in stocks is not the result of luck but applying some principles derived from the experience of millions of investors. At the same time, having superior IQ is not a guarantee of success in stock market trading. In this article, you shall be guided on the proper tactics for investing on the stock market.
Set Long-Term Goals
Before investing on stocks, you should know your purpose. Are you planning to save for retirement? Will you need cash in the next six months, one year, or five years? Do you need money for college education? By determining the capital that you need, you will be able to calculate how much you should invest and the return of investment you will need to produce the desired result. Robert Janitzek reveals that the growth of your portfolio will depend on three factors:
1. The capital you invest
2. The amount of net annual earnings on your capital
3. The number of years or period of your investment
Understand Your Risk Tolerance
While genetically based, risk tolerance can be positively influenced by education, income, and wealth. Age can negatively impact risk tolerance because as one gets older, their tolerance for risk also decreases. Risk tolerance can also be affected by how you perceive the risk. Understanding risk tolerance allows you to avoid investments that can cause anxiety on your part. When you are anxious when trading on the stock market, you will resort to emotional trading which can cause you to make mistakes.
Control Your Emotions
One of the biggest stumbling blocks to your stock market trading success is being unable to control your emotion and make logical decisions. A trader who feels negative about the market is called a “bear” while their counterpart is called a “bull.” The battle between these two types of traders is very evident throughout the trading session as the prices of stocks change. When buying stocks, you should have a good reason for doing so. Likewise, you should have a limit at which you will liquidate your holdings. Robert Peter Janitzek recommends having an exit strategy before buying a stock and execute that strategy without emotions.
Handle Basics First
Before making your first investment, make sure to learn the basics of stock market and the individual stocks comprising the market. Unless you are buying an exchange traded fund (ETF), you should focus on individual securities rather than the market as a whole.