If you are looking to invest in the stock market, here is some investment advice you might consider before putting your money into the stock market.
Investing can be the path to financial security, as well as, the road to bankruptcy. While luck can play a part in it, you should do your homework and know what you are getting into. Make sure that you go into investing with your eyes wide open. Use the advice from this article to help you make the most of your investments.
If you want part of your portfolio to stay ahead of inflation, general stocks are your prime opportunity. Over the last six decades, annual stock returns have average ten percent. That has been well ahead of bond yields and real estate earnings. A balanced stock portfolio across the market is historically the best proposition for growing wealth, whereas handpicking stocks or sectors might not generate this result.
To make your stock market investing more efficient, try a good stock management software package. Tracking stock prices and trends can be mush easier when you use your software to generate the information you need. Add your own personal notes for company information and analyze your data regularly. The cost of these software products is worth the investment.
Remember to rebalance your portfolio. This is where you try and keep more risky stocks “balanced” with more conservative stocks. Rebalancing can be done on a quarterly or annual basis. Monthly rebalancing is not usually recommended. By periodically rebalancing your portfolio, you can not only weed out losses, but also make sure that yields from winners are reinvested in other sectors that will eventually hit their growth phase.
Do not invest your safety money in the stock market. Even conservative and dividend stocks can take a beating on any given day. The six-month income you have (hopefully) saved up for a rainy day should go into a money-market account or a laddered tier of certificates of deposit. After this you then have a green light to play the markets.
If you are nearing retirement or your investment goal, then your stock picks should be more conservative than average. Large cap stocks, dividend stocks, blue chips and any company with low or no risk of capital depreciation are all good choices. This is also a good time to start shifting out of the stock market and into bonds or other fixed income assets.
Keep in mind cash does not always equal profit. Cash invested is not necessarily cash at hand, so remember that your investments need cash in order to thrive. Although it’s fun to spend your money or reinvest it, you should make sure you have enough money available in order to pay off your bills. And as mentioned earlier, you should have the equivalent of six months worth of living costs squirreled away just in case.
Examine your trade confirmations carefully. When you place a trade through a broker, you will get a trade confirmation via mail or email. Examine it carefully, and if you find an error, contact the broker immediately to get it corrected. Also, hold on to your trade confirmations, as they are needed for tax purposes.
As already noted, investing can lead you to financial security or it could cause you to lose everything. While being lucky can make the difference, it is knowledge and wise decisions that are the things that you can control. Use the information from this article to be able to make the most informed decisions when investing your hard earned cash.