One of the biggest reasons beginner investors lose money when investing in stock market is not having a system in place.
This is a big mistake to make especially if you want to build long-term wealth through investing in the stock market.
Why? Because the stock market is one of the mountains of wealth that you can make money investing.
In an article published by www.businessinsider.com on stock investing, the S&P 500 index had a 27 percent gain in one year.
On the other hand, you have many investors who lose money investing in stocks.
The main reason they lose money in stock investing is that the get emotional about investing. They let the market control them instead of managing their risk.
As a result many of those investing in the stock market-sabotage their own plans to get wealthy
If you are a novice investor in stock investing here’s the thing you must do:
You need to find a proven model for investing in the stock market and stick with it.
I learned a stock investing system that served me well over the years.
If I had to narrow investing in the stock market down to five steps, they would be…
- Define your investing objectives
- Find the stocks that meet your investing objective
- Have an exit strategy in place
- Cut your losses, let your winners run
- Keep testing your investing system
Outline your investing goals
The absolute worst way to invest in the stock market is to pick stocks because you had a hot stock tip.
You would think that it makes sense- that anyone who is investing in the stock market -would do a thorough research before putting money invest.
The truth is many people I know do stock investing on a “hot tip” from CNBC, their neighbor and relatives.
Investing in the stock market-on the whim of a stock tip-is one of the biggest reasons most investors lose money.
What you should do instead is to find out why you want to invest in the stock market
There are two ways you can invest in the stock market:
You can buy and hold stock for the long term.
You can buy stocks and sell them for profit in the stock market
Both methods of investing in the stock market have worked for many investors.
The most important thing you must do is choose-the best method that will match your investing goals
Study and choose stocks that meet your investing goals
Once you are clear about-why-and-how-you are, going to invest in the markets you should spend some time to study the stock market.
When you are studying the market, you need to screen for the stocks that meet your criteria.
There are many stock screening tools you can use. You can get these stock investing tools free or pay for them.
The secret to choosing stocks you’ll invest in is: Have a knowledge of the industry or the company you are choosing.
It’s very easy to know more about a company’s financial summary from financial websites
Here’s some of the ones I use:
www.morningstar.com (this is for those investors who are interested in mutual funds)
www.gurufocus.com ( this website is useful for finding out the investing strategy and stocks investing gurus are investing)
www.optionetics.com (this website is useful if you want to learn options trading)
www.investorhome.com is a portal for investors on the internet. You can find all the top investing education, news and stocks sites at this portal
Have an entry and exit strategy
Something every beginner investor needs to know about stock investing is this: successful investors have an entry and exit strategy in place before they invest a dime in the stock market
Why? Because in the secret to creating wealth in the stock market is having a clear game plan.
This means you have to be clear about how much money you are willing to invest in a stock. You also have to know upfront how much stock market losses you can tolerate.
The best way to protect the money you invest is: to have a price range you are willing to buy a stock. This means you should never buy a stock at any price
The other thing you must do to protect your money when you buy a stock is to have a stop loss mechanism in place.
This means you should set a particular price for which you are going to sell a stock if the price starts falling.
Cut your stock market losses and let your winners run
The hallmark of successful investors is that they are willing to let go when they lose. They don’t hang on to a losing strategy.
Most successful investors will quickly sell a stock that is tanking so that they reduce their stock market losses
In the same manner, successful investors also allow their winning stocks to keep on yielding profits
You should adopt the same mindset that successful investors have when you start investing in the stock market
The secret to winning and building wealth in the stock market is to-stay in the game long enough- that you win.
This means you want to invest your money with low risk at the same time earn good returns on your money.
After all that is why you are in investing in the stock market.
Therefore, you must keep on testing and tweaking your system of investing in the market until you achieve your goals