As the news is full of new highs for the Dow-Jones indicators and the market seems to be on the rebound from disastrous lows only a few short months ago, more people are wondering if investing in the stock market is a smart move. Those big name investors who make money through direct investing and through advising others have mixed recommendations. If you choose to put your money in stocks, here are 8 things to know before investing in the stock market.
You need to know whether you have enough disposable funds available to enter the market at the level you want. These funds should not be all of your disposable income. You should only invest monies that you can afford to lose.
In fact, you should only plan to put money in the market if you will not need it during the next five years. Investing in stocks should never be considered as a checking account or even a money market account. Buy wisely and give the stock value time to grow.
Choose a broker that has a track record of success. Some brokers specialize in certain types of clients. Other brokers will not accept small accounts.
You need to familiarize yourself with the terms and buzz words that will be used. There are many terms that will help you to understand the underlying value of the company. You should understand common accounting and financial terms.
Do the necessary research for yourself. Don’t rely on a tip from the checker at the supermarket. If you don’t have the time, consider joining an investment club. Members share the research and their findings at meetings.
Your long term investment goals should help you determine how much risk you can handle. A young person could risk a higher proportion of investment capital than an investor who is nearing retirement age. Assess the risk factors and these 8 things to know before investing in the stock market prior to putting any funds into the market.
It is best to increase your level of market investment over time. A small amount invested monthly will allow you to modify your investment plan to accommodate changes in the market. Investing a small amount each month also allows for changes in your financial circumstances.
The final suggestion of the 8 things you should know before investing in the stock market is to diversity. Never put all of your eggs in one basket. Companies, even the best ones, come and go and you should protect yourself with a varied investment portfolio.