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FX.co ★ Five stock market basics for beginners

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News in Pictures:::2021-05-19T13:55:05

Five stock market basics for beginners

Ability to understand types of stocks

The likelihood of failure in the stock market increases if an investor purchases completely unfamiliar assets. Before investing in the equity of a certain company, analysts recommend carefully studying the financial position of this organisation. The market participant should be aware of its history, plans, and key stages of the company’s life-cycle. According to Berkshire Hathaway Vice Chairman Charles Munger, if a trader has no insight into the company's work, its business conditions, and the ways to make money, it is worth choosing another asset.

Five stock market basics for beginners

Setting investment goals

Difficulties in the stock market trading arise in case a novice investor does not have clearly defined goals and objectives. It is important to understand what you want to get from your investment, experts emphasize. Diversification of financial assets is considered to be one of the key goals.

Five stock market basics for beginners

Diversification of investment portfolio

The next rule of the exchange market stems from the previous one: experts note the importance of investing in various assets. There is a principle in the market: “You cannot put all your eggs in one basket”. In this case, the risk of losing your savings is very high. In this regard, analysts stress the need to distribute investments (stocks, gold, real estate, and others). As a result, the investment portfolio will be balanced. However, you should not be too obsessed with excessive diversification. Specialists emphasize that the best way is to invest in popular market segments rather than in stocks of "hype" industries. They advise investors to refrain from companies with ambitious but unsecured plans.

Five stock market basics for beginners

Use of risky assets and wrong choice of broker

Choosing a reliable broker and using the most suitable financial instruments wisely are the most important things in the stock market. Traders are not recommended to invest the last of the money. Experts also pay attention to the choice of reliable assets. The biggest threat to a novice investor can be posed by leveraged trading. Using the funds borrowed from a broker carries high risks of suffering huge losses.

Five stock market basics for beginners

Lack of interest in economic and financial news

The lack of interest in analytical news about the stock market may also lead to unsuccessful trading. Economic and political news is of great importance. According to Oleg Vyugin, Chairman of the Supervisory Board of the Moscow Exchange, the market has been moving irrationally lately, while time-tested indicators do not reflect reality. Nowadays, the stock market is mainly controlled by the media rather than by analysts who have taken a back seat. The current asset price largely depends on fundamental factors, specialists emphasize.

Five stock market basics for beginners
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