Have an Emergency Fund
Investing can be both a profitable and risky thing to indulge in. Your assets are fully out of your control and they will fluctuate based on how the market moves even when you are an active trader. Having an emergency fund is crucial for safe investing to ensure that you do not make withdraws when the market is highly volatile or when it is trading low. The goal of investing should be to maintain or add to your financial worth. An emergency fund ensures that you have enough money to keep you going until the markets stabilize. I recommend up to 3-6 months cost of living worth savings to ensure you can weather any unpredictable financial storms.
Research Company/Industry Red Flags
We all know that 2020 has been the best year for the markets in history. The Dow hit $30k recently and the other stock market indices have equally faired better than ever before. While it is 100% true that these performances are not an accurate representation of the real economy, IT IS a reflection of how the “big companies” are doing. Researching these companies is important to make you understand their financials, profitability and how much you should invest in them before risking your money. Be sure to do your due diligence for every sector, industry and business you are interested in investing in. The more profitable a company is, the higher the potential reward for you, and vice versa.
Reinvest Your Profits & Dividends
If you are already a stock market investor, you may or may not have accumulated dividends and profits. A dividend is the distribution of some of a company’s earnings to a class of its shareholders while profit is whatever you made on top of the principal after a stock’s price increased. You can grow your money by constantly reinvesting your profits and dividends. Withdrawing whatever amount you have made from investing can make you miss out on potential profits if the stock trades higher. Do your research on how you can put back the money to keep growing it especially if you have an emergency fund set up already and do not need the money urgently.
Comment below on other investing tricks beginners should know!
I think you’ve covered the main points, especially the first one which is having money in savings. One trick I learned is to anticipate the demand or the promising industries that will shack the market and give you a higher dividend.
I totally agree! Saving is so major, probably the primary thing especially with the current state of the economy.
And your 2nd tip is really good too! Staying on top of the news cycle to be aware of what is/can be profitable can be very beneficial