Following recent stock market crash, many people avoid investing in stock market. However, should the economy gets better and the stock market starts to show healing process, perhaps the time has come to start investing in the stock market again. What should you do to start a successful venture in the stock market? The following tips may give you a clue.
Choose the right industry, not the right stock
The ‘right’ stock this morning may not be the ‘right’ stock this afternoon. The price of stock can be very much volatile. Therefore it is wiser to choose the most promising industry
Choose the stock issued by the best company within the industry
It may take a lot of research to establish which the best company is. You must look at the fundamental of the company. You must understand the business of the company. It is always wise for you to choose the company whose business is easily understandable. You must choose the company which is proven to be profitable over the years.
Be prepare for long term investment
Stock market is very volatile. Whilst the yields of long term investment may not be as high as shorter term investment, it will be safer, especially if you are a risk averter who likes conventional way of doing things. Do not get distracted with today’s price fluctuation, just think of how much your stock will worth 10 to 15 years from now.
See any price fall as opportunity to buy
Always easy to say it, but it is
Always remember, high return means high risk
Being careful is always good. It is fine to be a risk taker, but do not make blind decision only because you are interesting to obtain higher return. The higher the return, the higher the risk will be. So if you are ready to obtain higher return, you must be ready to take higher risk.
Built up your portfolio
Once you start buying stocks, you can start building up your portfolio. Diversification is good, but don’t get too much diversified. Choose only those fundamentally good stocks and buy as much as you could.
Do not get too much distracted by macro economy
Macro economy may trigger rumors that can increase or reduce your stock value. However, such rumors usually only affect stock market for short period of time. As long as you stick to your long term investment goal, this will only have minor overall impact on your portfolio.