Setting foot into the world of stocks and bonds, bull and bear markets, index funds and mutual stocks can be, understandably, confusing and intimidating. There’s a certainly level of confidence and understanding one should have to play the market with any degree of certainty.
But you’ve decided to take the dive into investing. Perhaps you read that a pathetically low number of millennials are taking that same plunge and decided to become an outlier. Perhaps you’re ready to learn more about the market and see first-hand what kind of returns you can get if you know what you’re doing.
Everyone has to start somewhere, and no one hits it big with their first investment. So while closing your eyes and picking some low-risk penny stocks might seem alluring (after all, you can buy quite a few shares) it’s important to have an understanding of the market before you play.
Buy Low Sell High
This is probably the first–and the most cliche–thing that you’ll learn when you begin investing. Everyone has heard this phrase, and for good reason. When you’re just stepping into the world of investments, you shouldn’t have a “go big or go home” mindset necessarily. Buying on low stocks (in anticipation of them rising), and selling on high ones (in anticipation that they’ll fall) is a tried and true strategy.
DO think of the market as a type of game
Gamification is an aspect of the stock market that can appeal to the masses young and old. With so many people focused on their mobile games now, the stock market can be looked at in a very similar light.
DON’T forget that you’re risking real capital
You may be able to look at the market like a game, but remember that no matter how much fun you’re having, you are risking real money. Losing a battle in your favorite mobile game might mean falling in the leaderboard, but getting caught up in the market and failing to recognize when you should bow out could leave you a little lighter in the wallet than you anticipated.
It’s important to set aside an amount of money you’re comfortable risking (start low if you don’t have experience) and not surpass it.
DON’T Go All in On One Stock
You might be inclined to dump all of your money into a notoriously well-performing stock–don’t. At least not yet. While you’re still learning the market, it’s important to remember that every company hits bumps in the road at some point. You don’t want to be the person who put all of his or her earnings into one stock and lost it all when it tanked.
Diversification is the mother of good returns. Diversifying might not mean you walk away a millionaire, but it significantly reduces the chances you walk away empty handed. In short, diversifying has a lower ceiling than going all in, but also a much higher floor.
DON’T Go In Blind
This is quite possibly the most important piece of information contained in this blog: if you don’t have a good grasp on the market, don’t begin investing your money. Is the market incredibly complicated and specialized, not necessarily. Anyone can play it, but not everyone can play it well. If you’re still in the learning phase, don’t trust what you read on Twitter or what your best friend from college told you–do your homework.
DO Consult Someone Experienced
Brokerage firms and professional investors exist for a reason. They can help you along in the beginning and give solid, foundational investing advice to get you off your feet. Many firms will also happily walk you through the process of setting up an investment account if you’re unsure of the process.