Ready to Ride The Stock Market? - Here's Some Must Know Newbie Tips

You're ready to take a trip and navigate through the minefield that is the Stock Market. Good for you because it's really the best place around to make higher returns on your money by buying and selling stocks.

I like to invest in individual stocks because it has been proven over the course of time, that stocks will rise in value. I do own some ETFs for US and Int'l diversification. I don't know how to pick individual stocks around the world so I use ETFs for that part of my portfolio.

I like to ask myself the question, "Will the stock I buy today be higher or lower in value in ten years?"  I love this concept when thinking of funding your retirement. You must think long term to be successful in the stock market.

What are the Obstacles? 

• It's risky
• professional traders everywhere
• trading commissions
• your emotions

You can't eliminate risk and yes you can lose money in the short term. Keep your emotions in check and don't look at your stocks every day. There is more to life than that. Don't panic and yes it costs you money in the form of trading fees when buying and selling a stock.

To be successful it helps to have a lot of discipline coupled with patience. Keep educating yourself to better protect the money you've worked so hard to make and invest. Now, you need to protect it and let it grow.

Research

Invest in knowledge before investing your capital. Read books by all the masters of investing like Buffett, Graham, Fisher, Malkiel and Bogle.

Get to know all the familiar investing terms like yield, growth, yield on cost, p/e ratios, ROE, what the different types of orders are and trends in the marketplace. Know as many investing ratios as possible. Join stock discussion forums.

Only Buy The Stocks You Know

Don't rely on luck and don't gamble away our money based on rumours you heard on Facebook or at the mall. Once you've made the decision to buy a stock, really know the reason you bought it. If you do that you won't be easily spooked into selling it when it drops in value short term.

I don't like a lot of risk. I just buy Canadian Blue Chip Dividend Stocks. Stocks with at least a 10 year dividend growth record for me to study. These include but not limited to; banks, utilities, telcos, industrials and food stocks. Maybe others with growth prospects and a low yield, maybe a REIT.

I don't buy non-dividend paying stocks.

Master Your Feelings 

• start small and allow your money to grow over time
• only invest money you can afford to lose, your excess funds
• don't sell at the bottom
• don't panic looking at paper losses
• ignore hot tips from friends
• remind yourself you are a long term investor
• if you make a mistake, sell on a day the market is rising

Have a Plan and Don't Deviate

There is no perfect plan for everyone. That's why we all have different experiences in the stock market.

If I lose 10% on my position I usually sell my stock. Have an entry and exit point for what you buy. As a retiree, I just hang on to what I buy. You may want to take profits once you make a 20% gain and buy something else. I'm a holder now and NOT a trader. The stock market is full of both.

If you don't follow a plan you've developed then you are just gambling.The strategy here is to make money. So, cut your losses early if you make a mistake and then look for stocks that are rising in value.

Diversification

I follow Tom Connolly's advice when it comes to diversifying my investment portfolio. The stock pick areas mentioned above are all I do to spread my money around. You can do it with just 5-6 stocks. It really is a nice easy way to start.

Forget bonds, preferred shares and penny stocks. They have no growth and will erode over time making them too risky of a long term investment. 

Related Post: Yield and Dividend Growth

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