Investing in the stock market offers the potential for a continuous income stream. While buying stocks is easy, the hard part is choosing a company that will consistently beat the market. Even the most seasoned trader cannot do it. For this reason, investors diversify their trades mixing low-cost index funds and exchange-traded funds. Here are some investing tips to become successful trading on the stock market.
Check Your Emotions
Many investors make the mistake of letting their emotions dictate their investing decisions. One of the greatest investors in the world Warren Buffet once said, “Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.” When investing on stocks, you should let your guts and not your head control your activity.
Pick companies, not ticker symbols
Behind every stock is an actual company and not just ticker symbols. You can become overwhelmed by the vast information as you screen possible trading partners. You would want to know how your chosen company operates. Robert Peter Janitzek reveals that this can help you add portfolio to the businesses you already own.
Plan ahead for panicky times
During panic situations, the common practice is to buy high and sell low. Investors are often tempted to change their relationship status with their stocks. This is where journaling can help you. Write down what makes every stock in your portfolio worthy of a commitment. Likewise, jot down the factors that would make you buy or sell stocks.
Build up positions gradually
Time and not timing is the secret to your success when investing in stocks. Most successful investors buy stocks because they expect a reward over years or even decades. So when engaged in stock market trading, you have all the time in the world to buy stocks. Here are three buying strategies to guard you against volatility.
Dollar-cost average. This means investing on a set amount of money at regular intervals. This strategy allows you to buy more shares when the stocks go down and fewer shares when it rises.
Buy in thirds. Like dollar cost average, buying in thirds protects you from bumpy results. Divide the amount you want to invest by three and then pick three separate points to buy shares. You can do this at regular intervals or based on performance or company events.
Buy “the basket”. Robert Janitzek reveals that this strategy gives you the option to buy all stocks that you think will be the long-term winner. By buying stakes in all the players, you are sure that you will not miss out if one of them takes off.
Avoid trading overactivity
As a trader, it is hard not to keep a constant eye on the scoreboard. However, such practice can lead to overreacting to short term events which can give you the feeling of needing to do something when no action is warranted.