1, Invest in what you know. You are naturally more knowledgeable on certain subjects than others, so it’s always a good idea to stay within your comfort zone and invest in those companies that you have some insight on.
This way, if anything happens to the company, or the market takes a dive for whatever reason, you’re going to be better prepared for it because at least there is something that you can do about the situation.
2, Get your facts straight before investing any money into something new and unfamiliar – again staying within your comfort zone of course – but make sure that everything is validated before spending any money on it. It can’t be stressed enough how important information gathering really is when investing.
3, Know your risk aversion — how much risk you’re willing to take on–before investing by using a financial questionnaire. Your high-risk tolerance means it’s good that you’re into gambling, but if your expected return is higher than the market, invest in stocks!
4, Consider how long you have until retirement and use that as a way to decide what type of asset allocation you want for your portfolio– whether it be more stocks or bond investments or something else like an index fund.
5, Investment is a long-term process. Do not be attracted by high return rates, as a low-rate investment with medium risk prevents major losses and keeps the principle intact over time.
6, Know the terminology, such as the company’s balance sheet, cash flow statement, or PCA ratio if you’re talking about mortgages or other types of loans, to understand how they work and what specific risks they carry because this will help make better decisions throughout your investment journey!
7, Check out the company’s Financial Statements before considering for investment to see if it has real prospects in terms of growth.
8, Investing in the stock market does not guarantee dividend payments or capital gains. In other words, even if a company is making more money than its investors are receiving, it does not mean that it will put this extra profit into dividends for shareholders or capital growth for the shareholder holder (through things like stock splits and dividends).
9, Creating a diversified portfolio is important since there are different levels of risk involved with each individual investment choice.
A well-diversified portfolio needs to have a mix of value stocks, which present lower risk but also produce lower returns than growth stocks; as well as high-quality bonds (maybe long-term), which may shelter your investment from longer market fluctuations.
10, Buy low-cost index funds and exchange-traded funds (ETFs). Index-fund investing is a “set it and forget it” approach to investing.
The provider invests in an index such as the S&P 500, always matches, and never underperforms that benchmark because open-ended mutual fund companies are forced to maintain an approximate balance between securities’ prices as measured by the total market value of that index at all times—thus no straying from its core benchmarks, which they cannot exceed.