When it comes to trading stocks, everyone has to start somewhere. Some people know more than others, but that shouldn’t keep you from building your wealth the way many others have done before you.
Aside from starting your own business, the only other way towards creating substantial wealth is through investing. Smart investors will start with learning, such as reading a Penny Stocks 101 Guide. Here are a few other tips to ensure you make the right moves.
Pick Safe Stocks
When you’re first starting out, you want to have a bit of a buffer so that you don’t knock yourself out of the market. As a result, you should focus on stocks that are less volatile than the market. Look for stocks with proven long-term prospects and start investing in those.
To illustrate, consumer staples are often a safe bet since people will always need clothing, food and medicine. Keep in mind that the gains won’t be as big. But, as a newbie, starting off with safer stocks will give you more time to learn about investing and increasing your overall wealth.
Watch Out for Hefty Fees
Depending on the brokerage you use, trading fees can add up over the course of your investing lifetime. This is why it pays to read an expert guide, and then, pick the right stocks–at the right amounts–with each purchase.
Having large expenses up front will hurt your results from the start. So, you should look for lower fees and no-load funds. You can even purchase stocks directly to eliminate fees entirely.
Before investing, always look at the fees.
Make It a Goal to Learn Something New Every Month
It can take years for some to become experts at investing. Of course, you can speed up that trajectory by learning something new every month. If there is a term that boggles you or you want to understand how certain investments make money, then, it pays to spend time learning more about them.
Perhaps you want to learn how bond prices relate to interest rates. On the other hand, you might benefit from spending some time researching penny stock superstars and what made them similar. Knowledge is power.
You stand to gain much more when you spend time improving your knowledge on various investments and strategies.
Understand Your Risk Tolerance
If you think investing in penny stocks is risky, then you must consider how avoiding the market is also a losing proposition. There are countless numbers of people who regretted leaving the market when they realized that they missed out on substantial returns.
Over the last seven years, stocks have gone up by around 10 percent. While you should diversify, you should definitely continue investing for the long term. Also, you increase your risk of losing purchasing power to inflation when you stay out of the stock market.
Each time inflation goes up, the value of your dollar goes down. In contrast, investing helps your money to appreciate. Keeping money stashed in a bank account only causes a loss in value.
You can make a lot of money with investing if you realize that a bit of risk will improve your rewards. And, it pays off in the long term, as well.