If we want to invest in the capital market, it is very important to have patience and not to act on emotional impulses.
We need to control our emotions and not let ourselves be influenced by the subjective aspects when trading on the stock market.
Greed and fear are the biggest enemies of investors. If you’ve decided to sell a title at a 25% profit, respect that threshold because otherwise it’s possible to lower your profit as a result of further corrections. And the mutual is true, if you have set a loss of 15%, do it, otherwise it is possible to record a larger loss.
10 tips for start-up investors on the capital market:
1. Do not invest in the stock market the money you need right away. Do not plan what to do with the money you will earn from your stock investments, because the stock market is unpredictable, and no matter how much experience you have or how many growth signals you may notice, the market may contradict you and fall.
It is not advisable to invest in the money programmed for important events such as schooling, medical interventions or other projects, because you may have less pleasant surprises.
It is recommended to invest in the amount of money that you may be deprived of for a period of time. It is said to “forget” about the money invested in the stock exchange. That does not mean you do not watch the market because it will do all the work for you, but not include that money in the next financial plans.
Also, do not invest in reserve money set aside for unpredictable situations, because it may not be to your advantage to sell whenever an emergency occurs!
2. Do not invest the borrowed money on the stock exchange. Borrowed money is interest-bearing and must be repaid within a certain amount of time. If the stock market does not confirm your theories, you will have to take money from other sources to cover any losses and to repay the borrowed amounts.That way, you may unbalance your budget over a long period of time and it will be quite difficult to recover financially. Reimbursement of borrowed money, which you have not benefited from due to decreases, creates a lot of stress and you will remain with a negative image about the capital market.
3. Investments on the stock exchange start with small amounts. It is much more comfortable to start trading small amounts in psychological terms because potential losses can still be small. All trading principles and rules are the same regardless of the amount you invest, whether you are a start-up investor or have a low-value portfolio. It is much easier to gain experience with an account with less zeros because you are more relaxed and you can learn from your own mistakes.
4. Start with a demo account in which to create a virtual portfolio. This will help you better understand market mechanisms and build your own information and analysis system. When you start to gain knowledge and figure out how the stock market works and are happy with the returns you get from the virtual portfolio you can start trading on a real account. You can still keep your demo account to test new strategies and make changes to your portfolio, which you are not sure you want to do in the real market. You will gain confidence in yourself and the capital market will no longer seem an unacceptable field. It costs you nothing to make a demo account, but you can gain a lot of experience.
5. Do not invest in complex financial instruments at first. Another important tip is to approach the market from simple to complex. From the basic investments that you know and know how it works and how you can gain, diversify your portfolio with more and more complex financial instruments as you gain experience.
6. Do not wait for the best price. When you have decided to sell or buy, do it at the market price. The capital market is dynamic and constantly moving, and no matter what plans you have, the market will try to contradict you. If you are a long-term investor, small price differences should not be the reason why you can delay a transaction. The more you expect the titles you are targeting to reach a certain price, the more you risk losing your earnings, or even worse, you can record higher losses.
7. Set up an investment strategy and respect it. Once you have identified the type of investor you are and your attitude towards risk, you can begin to make a strategy for future investments. The most important thing about the strategy you set is to respect it and not to change it frequently. If you oscillate between two or more strategies, you risk not to get the expected results. Discipline is one of the most important qualities of an investor, be it beginner or advanced.
8. Do not invest all the amount available in a single financial instrument. The likelihood that all the financial instruments you invest in will decrease at the same time is rather small. By allocating financial resources to different destinations, you can cover the potential loss of some of your investment through the gains made by others. No matter how tempting an investment is, do not bet on a single card!
Diversification can make a difference between a winning investor and one who still expects his investment to become profitable.
9. Invest in the long run, so downtimes will have time to recover and on long-term you can make profit.
10. Invest in blue-chips. Blue-chip shares are the most liquid stocks with high capitalization and consistent financial results over the years. These shares have increased their value over time, due to the confidence shown by investors, confirming each year without disappointing their shareholders. These shares are usualy part of a number of stock indices, which once again demonstrate their quality of capital market stars.
Last but not least, when investing in the capital market, you must always be informed and not invest based on rumors. Any information needs to be verified from multiple sources and as far as possible these sources must be reliable.
Do not forget that in order to be an investor you need to spend time on this activity and become actively involved in decision-making.