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Stock market for beginners: The nine basics of successful investing

by , 30 March 2015

Investing on the stock market is daunting. And this isn't only a problem for new investors, even experienced investors struggle with the decisions they make.

So it's important to know what the basics of successful investing are.

Read on to find out…

Nine things a successful investor should never forget

#1: There is no get-rich-quick route
You should have a minimum time horizon for about two-years for each investment you make. If you see claims of high returns in a short space of time, it’s with high risk.

High risk investing means there’s more risk of losing your money.

#2: Make modest investments initially
Until you really get to grips with what you’re investing in and how it works, keep your investment amounts low.

As your knowledge grows, you can increase your investment amounts.

#3: Avoid investments you don’t understand
If you don’t understand an investment, don’t invest. Or if you don’t know how an investment will generate a return, don’t invest.

#4: What sort of returns are you looking for?
A lower return is generally safer and more achievable. At the very least you want to beat the current rate of inflation.

#5: What to invest in
This depends on your age. The younger you are, the more you should have in stocks. The older you get, the more you should have in safer assets.

#6: Diversify!
Don’t put all your eggs in one basket. For example, don’t put all your cash into property or one stock. You want to hold a spread of different investments. This lowers your risk.

#7: Look at past performance
The stock market and other financial markets repeat themselves over the years. So look at what’s happened in the past.

#8: The trend is your friend
Don’t fight the trend, always invest with it.

#9: Cut your losses
Before investing, you need to have an effective exit strategy in place, such as stop losses. Cutting your losses early will prevent hefty losses dragging your portfolio down.

So there you have it, the nine basics of successful investing.

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Stock market for beginners: The nine basics of successful investing
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