Did you ever imagine investing in stocks? Where to go? How to go? Where to invest?
These are some questions that a person asks before stepping foot inside a stock market. Often there is a misconception that investing in stocks is very complicated.
However, investing in stocks is less complicated than it looks.
The major factor associated with stock markets is risk. People back out thinking that the risk is major if they suffer a loss. Truthfully, starting off with a big amount is obviously too risky.
A passive investing approach is the need of the hour. They generate sustainable returns with minimal risk.
There are some basic noob questions that you should ask yourself before investing in stock markets-
- How much should I invest in stock markets?
- Why am I choosing to invest in the stock market and what are my investing goals?
- When should you hold, relax & manage your portfolio?
Slowly we will answer these questions and once you get your answers you will be ready to tread the path of investment in the stock market.
- How much should I invest in stock markets?
The answer depends on a person’s income.
Generally it is said that you can invest upto 15-20% of your income each month on stocks.
This strategy requires effective budgeting, but it pays off in the long run.
Generally there are some accounts you need to invest in compulsorily.
Invest 5-7% in your retirement account numero uno. Funds after retirement are your major source of income from your own investment.
Once you invest in your retirement, invest around 10% in a short/medium term brokerage account. One of the major reasons for investing your money in the stock market is to protect it from inflation. Cash in your savings account is not really of any use if it is not generating interest, merely being a victim of inflation.
A safe and smart way to invest your money rather than just keeping it idle in the bank is by investing it in the stock market.
- Why am I choosing to invest in the stock market and what are my investing goals?
Why are you investing in stocks and what are your goals? This is a highly important question in regards to investing.
If the reposte involves you investing to get richer quickly then you are living in a dreamland. Don’t let successful traders mislead you into believing you invest and get rich. For it is immensely difficult for some traders to even cover their trading fees.
Also the risk tolerance factor and time period affect a lot on your decision making. A low risk tolerance leads to safe investment and vice versa leads to higher reward stocks.
- When should you hold, relax & manage your portfolio?
It’s commonly mistaken that you have to constantly purchase, sell & trade stocks in order to become rich. But in fact, it’s the opposite.
When you have done your first smart investments, it is better to stay quiet. Just keep purchasing and holding stocks, & leave your assets alone.
However, it is important to assess when you should change your portfolio.
When is it time to sell assets and when is it time to purchase new stocks it’s completely your decision.
