Important points stock investors should remember
Investing on the stock market can be lucrative but also risky. Before investing in the stock exchange, it is important to understand the risks involved. These are some important points novice investors should remember:
* First steps: Decide what type of investments you want before investing in the stock exchange. Open an investing account, trading account or demat account. Learn about stock market terms. Learn about investing basics such as equity, debentures and debenture shares, common stocks, preferred stock, open-ended investments companies (OCI), penny stock, short term stocks funds, etc.
* It is important that you analyze the economic direction when investing. If there is a chance for the economy to improve, it is a smart decision to invest. Experts advise against investing in stock market when there is high inflation or when the economy is in danger of falling into recession. Recession basically means there is a downfall in the economy as the demand for goods & services falls for businesses and individuals. A falling economy can lead to lower production and fewer jobs, which may require the government to solve the problem.
* Stocks should be purchased when the economy continues to grow. This is due to the fact that during these times, the stocks of booming economy companies usually show a higher return. Investing in stock funds or mutual funds is also a smart option. During these times of booming economy, it is important to choose low risk options that offer high rate of returns. However, it is important to not choose the cheapest stock option. Cheap stocks can be disastrous long-term.
* During these times of boom, it may seem easy to buy stocks and invest, but experts advise that it is a good idea to purchase bonds. Bonds are a great option for investing in stocks because they offer a guaranteed rate of interest. You may have to spend more if you buy bonds during rising interest rates. It is better to wait until rates fall.
* Stock market investing should always be done with research in order to ensure high returns. Experts recommend that you ask your family, friends, and colleagues for their opinions about different stocks. If you have friends who are into financial services, you can consult them to help you out with investments. You can also ask a broker for advice on which stock to invest.