Although the stock market is riddled with uncertainties, certain tried-and true principles can increase your chances to long-term success.
The first thing any investor needs to do is define their financial goals, such as saving for retirement, buying a home, or funding your children’s education. This will help them decide how much to invest in the market and what type of investments make sense for their needs.
Prioritizing the creation of an emergency fund or paying off high-interest loans prior to investing in the market is an excellent option. Start small and increase your investments over time as you become more experienced.
Keady explains that one of the most common mistakes made by novices is to attempt to time the market. “Nobody knows the exact time to invest,” she adds, noting that the best strategy is to commit to an investment over the long term and stay with it, even through the tough times.
When you’re first starting out, you should focus on stocks of companies that you are familiar with. As the legendary Fidelity Magellan fund manager Peter Lynch famously stated that you have a higher chance of winning when you bet on companies that have a strong history and strong growth prospects rather than trying to predict the future.
Avoid online forums and adverts that promote stocks with a high probability of success. These are often part of a pump and dump plan that involves shady investors buying buckets of shares in a barely traded company to drive the price up, then take their shares away for their own benefit.
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