If you make it to this article, then you’re probably one of those people who have heard that stock investing is one of the best ways to grow money. You’re probably trying to look for confirmation if getting rich is possible by simply investing in the stock market.
The truth is, some could get rich in the stock market and some could also get bankrupt and lose everything in it. Getting rich is possible in the stock market only if you practice these two things:
- Manage your investments properly; and
- Get yourself out of bad spending habits and financial mistakes that can make you bankrupt.
So, if you’re thinking if the stock market is a great way for wealth accumulation, here are some things you might want to consider.
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Your Broker Can Make Or Break Your Investment
One of the important things that you must consider before jumping into stock market investing is to look for a great broker. A broker is an individual or firm where you can buy and sell stocks. One of the popular brokers among millennials is Robinhood due to its commission-free trading feature. However, because of the recent controversy it got involved with, young investors are now switching to other brokerage firms.
There are many Robinhood alternatives that investors can start looking into. However, always consider choosing one that offers a commission-free trading feature or one that has the lowest fees compared to the others. By doing so, you can minimize the impact of the commission on your return of investments (ROI).
Also, when you sign up for an investment account, there are many fees that brokers can charge for the maintenance of the trading platform This trading platform is where you can execute your buy and sell order. Brokers may also charge fees for providing helpful data to their clients.
Inactivity may also incur extra fees, and these may affect your investment return over time. This is the reason why choosing the right broker is crucial in stock investing.
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Know The Type Of Investment You’re Getting
Depending on your goals, you can choose to either invest in the long-term or short-term. To help you start, here are the general differences between the two.
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Long Term Investing
Long-term investing means buy the stock and keep it for years until it reaches your target selling amount, or when the need of selling it arises. For some investors, this practice is profitable if you’ll buy stocks only from the biggest companies that have proven profitability ratios over the years.
Even though investing in the most popular and big companies gives assurance that investments will surely bring profits, but the percentage of increase over the years isn’t big enough. Some investors try to work around this scenario, by finding not-so-popular companies that promise bigger returns.
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Short Term Investing
Short-term investing is buying stock then selling it after a short period. If you have limited funds and your goal is to accumulate more and increase your fund, then investing short-term in stock is right for you.
A good example of short-term investing is day trading. Some investors engage in day trading as their regular source of income. Though it is possible to earn big, you need to be careful if you aren’t a professional trader as trading often just increases your chance of losing everything.
Short-term investing can also give huge profit for some investors especially for penny stocks which prices can spike up all of a sudden. Investors who have more advanced skills in analyzing a stock’s trend, volume, and related indicators can make a huge profit out of it.
While long-term investing can give you a high possibility of growing your money, the truth is, it’s still just a possibility. If you’re impatient and you can’t just sit and watch your investment increase and decrease its value every day, then short-term investing might interest you.
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Finding The Right Stocks Matters
Many factors can affect a stock’s price and its value over time. Popularity may affect a stock’s value and price but most of the time, its impact is only small and can only lead to quick fluctuations in its value.
To assess their value, some investors use two different strategies to identify what stocks to buy. They are fundamental analysis and technical analysis.
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Fundamental Analysis
Fundamental analysis is a strategy where an investor determines if the current price of a stock is higher or lower than its real value. It’s a useful strategy to help you decide which stocks to get.
A part of fundamental analysis focuses on knowing the factors that may affect a stock’s current value. The industry that the company participates in can be a factor to consider. For example, if you believe that e-commerce isn’t dead and it’ll soar higher for the next couple of years, then you might want to consider looking at start-up companies in this industry.
Analyzing a company’s competitor is also part of fundamental analysis. Some investors prefer to invest in companies that don’t have too many competitors yet. Other factors to consider are news and press releases that are related to the company’s growth, domestic political conditions, and other elements that may affect people’s confidence in a stock’s price.
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Technical Analysis
Technical analysis is a strategy where investors use a stock’s chart to analyze its price movement. Most investors find this strategy quite intimidating as it requires skills and a deeper understanding of chart analysis on a stock’s behavior over time.
Using technical analysis, investors identify patterns and indicators to measure and predict a stock’s price in the future. Most investors have different technical analysis strategies, and some of them developed those strategies over time.
Some investors prefer to use only technical analysis as their basis whether to buy or sell a stock. Most investors, on the other hand, use a mix of both fundamental and technical strategies to reap good profits.
Final Thoughts
Even though no one can get rich in stock investing overnight, most investors would say that they became financially secured through it. Some even testified that it made them rich, but who knows about the struggles and hardships they went through before achieving such. The bottom line is, investing in the stock market is just like any other type of investment. In other words, it needs thorough study, dedication, and practice to give you significant profits over time.
Interesting Related Article: “8 benefits of investing your finance in stocks“