Following the economic crisis that took place in 2008, most young investors became scared to put their money in the stock market. Other than the significant challenges that hit the global economy a decade ago, many challenges are involved in the stock market today, and one ought to understand them in detail before investing. In this article, we breakdown everything that you need to know as a novice stock market investor.
The bad experiences that were felt in the past few years have shaped how investors make decisions in the stock market today. They know those bad decisions might have dire consequences that they might never recover from. Potential investors have lost their trust in the stock market today.
This is also caused by the lack of enough knowledge of how the market works. This makes them have less confidence in the stock market today. Generally, the stock market has its own challenges that, if you are not aware of, might enhance the chances of you losing your money.
Due to fear, or uncertainty of how the entire thing works, some potential investors keep procrastinating their financial planning. Below are some of the most challenges that one might encounter when trying to invest in the stock market today.
YOU COULD LOSE MONEY FAST
Experienced investors understand the fact that the stock market is unpredictable. The risk involved is that you stand to lose your money so fast. Compared to the fixed interests that are guaranteed on your savings, the stock market today does contain ups and downs, and once your money is gone, you can’t recover it. The cash put in the stock market today does not guarantee any steady growth within a given time.
It is common to hear that some investors put money in the stock market, and they lose it before making even a cent. This occurs all the time, but not because the market is complicated, but rather beginning investors haven’t done their homework.
There is that aspect of failure, which entails both emotional failure and financial failure. Note that you might also get exposed as an uninformed investor for having tried something that does not conform to your area of expertise.
The fact you must know is that no one, despite their level of expertise, can predict with full certainty when a stock of a given company is going to fall or rise.
Therefore, whether you are a new or seasoned investor in the stock market, rest assured that there are times you will encounter a fall in the value of your principle throughout your investment journey. But this is not something you should fear as long as you are ready to learn.
As an aspiring investor, there is no need for you to panic when your investment, encounters a sudden drop in the value, especially when the fluctuations are just short-term.
When following up on how your investment is doing, it is essential always to see the bigger picture.
Instead of being nervous about the unavoidable versatilities, try to marvel at the quality of your investment. Some fluctuations happen, but they don’t last long until the market picks again.
Note that while the stock market might look risky and complicated, most of the time, it records an average growth rate of 10% per year. It is better than what you get with fixed deposits. If you invest over a long period, you should expect to make more money than you lose.
THE STOCK MARKET TODAY IS TOO COMPLICATED
Most beginners lose money in the stock market today. This is not because the market is complicated, but because they don’t do their homework to monitor how the entire thing works. Therefore, they fail to make informed decisions. This thing requires consistent research and putting money at the right time.
Nevertheless, beginners can make money from the stock market today as long as they follow the rules. One of the things to do is to dedicate at least one hour each week to study something from the best stocks and shares ISA.
This encompasses doing research, diversifying their portfolio, and not purchasing shares of damaged companies. It is advisable to begin by investing a tiny portion of your money that you can afford to lose. It pays to expose yourself to some fears and then letting it go after some time. Do this in manageable steps and ensure that you learn at each stage.
If you don’t feel knowledgeable enough to start, look for an experienced person to hold your hands. You can liaise with a qualified financial advisor to help you make safe, accurate decisions while teaching you the details involved in the stock market. If you are unsure or anxious about anything, the expert can reassure you so that you keep going. This is one of the best ways to overcome fear and start investing in the stock market.
LACK OF ENOUGH INFORMATION ON STOCK MARKET
It is common to be advised against investing in something you are not well informed about. As a beginner, it is reasonable to hide in the fear that you have zero knowledge of the stock market. You indeed need to learn something about the market before giving it a try.
However, it might be better to understand once you are inside of it. If you are a newbie, the chances are that you might purchase unit trust funds without the knowledge of what you are purchasing. Later on, you will learn that the value of the funds is directly proportional to the index value.
This is where you get to believe that knowledge is power. However, this knowledge is freely available, thanks to the internet. Make sure to check the right sources before you begin. For heads up, you want to stay from investments that are hyped to have huge returns within a short period since such promises never materialize.
INCURRING HUGE LOSSES
It is true that you need to spend money to make money. Though this phrase makes sense, you don’t need to start by throwing in a large chunk of your savings into the stock exchange. You will hear the rumor that you need a lot of money to begin investing, but this claim does not hold any truth. As mentioned above, start small and increase the size of your investment slowly as you study and learn the market.
THE FINAL THOUGHT
The stock market today is confusing, but that does not mean you should avoid it altogether. Some simple tips can help you make good money on the market. It is best to go slowly. Don’t begin by throwing thousands of your investment into the stock market because the chances are that you will lose it all, especially if you are a newbie.
The market keeps rising and falling, which is something you need to understand fully. It is a tricky business that requires a lot of courage to venture into. But you can slowly and steadily learn and become an experienced investor. Try to research the different companies thoroughly before you enter the market.
Previously published here and reprinted with the author’s permission.