Getting Started in the Stock Market

Getting Started in the Stock Market

by David Redmond on 21 Jan, 2011

Investing in shares is one of the best ways of making your money work for you. However, it is also one of the riskiest. The decision to enter the stock market should not be taken lightly, nor should it be made to ‘make a quick buck’.

Don’t invest more than you can afford to lose

This is probably the most important piece of advice for anyone thinking about investing in shares for the first time. As long as you only invest disposable income, you won’t risk ruining yourself. As you become more familiar with how it works, you may become more comfortable investing larger amounts, but certainly at first, it’s best not to take too large a risk with your money.

Start with ‘safe’ investments

Although there’s is no such thing as a ‘safe’ investment – Lehman Brothers looked like a pretty good bet before September 2007, keeping to the FTSE 100 to begin with will certainly minimize your risk. Once you’ve learnt how to read share prices, you can start watching smaller, riskier companies and evaluating them for investment.

Large companies like Apple, Amazon and Google are unlikely to go anywhere soon.

Be prepared to face the bad times as much as the good

For novice investors, the site of your investment’s share value dropping can make you go white. However, share prices naturally fluctuate, particularly as part of larger market trends. As long as you’ve only invested what you can afford to lose, it may be better to take a long term view and wait for the share price of your investments to recover.

Don’t panic

Whatever you do, don’t panic. Every decision should be made on a rational basis. If you panic, you may end up selling well short of the value of your investments. No one invests with the aim of losing money.

And finally…

If you take on an adviser, don’t trust their advice absolutely and without question. They do know more than you because it’s their job, but there are no sure things, and the more you know about your own investments, the better.

 

About the Author

David Redmond


David Redmond is a Partner of Don Gilliard Finance Group. He is a fee-only, independent financial advisor and financial planner. For over 15 years, he has been helping individual investors and their families realize their investment goals.