Hundreds of thousands of people from all over the world have money in the stock market and many of them are managing their portfolio poorly. If you’re not careful and don’t tread carefully, you can easily lose a ton of money. The tips in this article will hopefully help you have a little more success in the stock market, though success in the stock market is never guaranteed.
Know Your Risk Tolerance
Before ever putting a single cent into the stock market, it is a good idea to make sure you know your risk tolerance. If you want to be thorough, you can use this online quiz we found on Rutgers University’s website. There are some people out there who are okay with losing thousands of thousands of dollars if an investment goes wrong, whereas that would ruin somebody else (emotionally and financially). There is no right or wrong answer. Your risk tolerance will help you decide how aggressive your stock market portfolio should be. And if you can’t stand to lose a penny, you should probably not invest in the stock market at all.
Be in it For the Long Haul
Much to the dismay of many eager newbies in the stock market, investing in the stock market is not a way to get rich quick. While it’s not theoretically impossible, don’t expect to get rich overnight via the stock market. Instead, be prepared for your money to grow gradually and look to remain in the stock market for decades and decades. While it is okay to change up your approach and the stocks and funds you invest in from time to time, investments need time to grow, so it’s best to leave them alone and only check every once in a while.
Keep Your Investments Diversified
Diversification is a way to keep yourself afloat in the stock market and is something everyone should do unless you are okay with possibly losing all of your investments. If you invest in stocks, invest at least in 15 different stocks. If you don’t have the time or capital to do it efficiently, you should probably look into investing in Exchange Traded Funds (ETFs), which are often already diversified. If your portfolio is diversified, and one of your stocks flops, at least you have money elsewhere that is still growing. But if you only own one stock, and it flops, then you have nothing.
Don’t Let Your Emotions Control Decisions
Making logical decisions and controlling emotions is perhaps the most important part of being active in the stock market. The emotions of the investors of the world often dictate the price and success of a stock. People can get scared or worried and sell a stock they shouldn’t or get excited and pumped up and buy one they shouldn’t. In the market, you should remain level headed and only make informed decisions that you have thought long and hard about.