One of the biggest reasons beginner investors lose money when investing in the stock market is the lack of a system.
This is a big mistake, especially if you want to build long-term wealth by 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, many investors lose money investing in stocks.
The main reason they lose money in stock investing is that they get emotional about investing. They let the market control them instead of managing their risk.
As a result, many investing in the stock market sabotage their 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, and let your winners run
- Keep testing your investing system
Know your goals before investing in stocks
The worst way to invest in the stock market is to pick stocks because you have a hot stock tip.
You would think that it makes sense- that anyone investing in the stock market -would do thorough research before investing money.
The truth is many people I know do stock investing on a “hot tip” from CNBC, their neighbors,s 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.
Do your homework and find the stocks that meet your goals before investing in the stock market.
Once you know why and how you will invest in the stock market, you should study the stock market.
When looking the market, you must 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: Knowing the industry or the company you choose.
It’s straightforward to know more about a company’s financial summary from financial websites
Here are 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 helps find out the investing strategy and stocks investing gurus are investing)
www.optionetics.com (this website is helpful if you want to learn options trading)
www.investorhome.com is a portal for investors on the internet. This portal can find all the top investing education, news, and stock sites.
Have an entry and exit strategy when you are invested in the stock market
Every beginner investor needs to know about stock investing: successful investors have an entry and exit strategy in place before they invest a dime in the stock market.
Why? Because the secret to creating wealth in the stock market has a clear game plan.
This means you must be clear about how much money you are willing to invest in a stock. You also have to know 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 stock at any price.
The other thing you must do to protect your money when buying a stock is to have a stop-loss mechanism.
This means you should set a special price for which you will sell a stock if the price starts falling.
Cut your losses. 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 they start investing in the stock market.
Keep 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 and earn good returns on your capital.
After all, that is why you invest in the stock market.
Therefore, you must keep testing and tweaking your market investing system until you achieve your goals.