How Should You Start Investing In The Stock Market?
If you do not have any experience in stock market investing then it could be a real trouble for you to place your first trade.
The biggest challenge one faces is to decide how much money should they invest in stocks and what type of stocks should form their portfolio. Also one should know how to be careful to avoid mistakes that can wash off your capital.
All these doubts can make one shy away from investing in the stock market. You could, however, look at the below-mentioned ways to start investing and use these tips to buy your first stock.
How much money should you invest in stocks?
There is no rule as such that will tell you how much money you should be investing in stocks. The general thumb rule is that you can take on more risks when you are young. You should gradually decrease your exposure to stock market risk as you grow older. This is because the stock market is highly volatile and a risky form of investment. So based on your risk taking appetite you can decide on how much money should you be investing into the stock market.
It is important that you invest some part of your portfolio in the stock market because the rate of return that the market offers is higher than most of the other forms of investments. This is important so that your investments beat inflation and also for your money to grow.
Should you invest into index funds or should you invest directly into individual stocks?
An index fund is basically a method by which when you purchase the fund you can invest into many stocks together. This is a great way to diversify your portfolio and it helps to reduce risk. This helps because in case a particular sector is not performing well or a particular company shares price goes down, you still have other stocks in your portfolio which will help you to make up for the losses.
How many stocks should you have in your portfolio?
If you, however, want to do your own analysis using this trading software and buy stocks then it is best that you invest in not more than 15 stocks. Take care to choose stocks across many sectors and diversify your portfolio. This could be a little difficult when you are just starting to invest in the market.
A mutual fund will let you invest in a diversified portfolio of stocks, even if you do not have a lot of capital to trade in. This lets you invest your money under a professional fund manager.