A Beginner’s Guide to Low-Risk Stock Investing

Stock investing can sometimes seem quite mysterious, so much so that it often feels like a quest. You have to survive all the obstacles, and you have to use the right language. In addition to that, you also have to make sure that it stays available for valuable members only.

Inexperienced investors can easily put the entire industry in danger. However, most of the time they are a danger to themselves. Because of that, there are regulations that protect them so that they don’t get cheated out of their money. And, those regulations usually work well.

Nevertheless, when it comes to investing, a small group of people is the one that’s benefiting from your ignorance. Those are financial advisers, brokers and others who want you to ask them for advice – and pay a substantial fee for it.

Therefore, to help you, we’ve compiled a list of things you should know about investing. These facts will also help you if you are investing to save up for your retirement.

If you want to learn even more, you may want to consider paid education. This Warrior Trading Review explains how traders can benefit from joining a paid trading community. You will get access to a chat room with experienced traders and you will generally get access to their watch lists.

1. When you buy a stock, you buy the company as well

You’ve read that correctly. However, don’t get excited too soon. When you buy the stock, you are also getting more responsibility. The company has to inform you about all material changes that happen to it, but you also have to read about it and make your own judgment.

2. There are two ways you can profit

You might think that the only way to profit is by buying a stock at a low price and selling it for a higher one in the future. That’s called capital appreciation. However, you should know that there are also dividends, and they can be an excellent source of income. Combine that with the capital appreciation, and you have a thing called “total return.”

3. The stock value goes up and down

Never forget one simple fact: what goes up can eventually go down. And, let us remind you that going up serves no purpose if it doesn’t beat inflation. So, if you are planning to limit yourself to just one approach – think again. For example, value investing is when you buy a stock for a seemingly depressed price. Meanwhile, momentum investing is when you buy a rising stock and hope everyone follows your lead. These strategies can sometimes work, but the timing has to be perfect.

4. You cannot avoid taxes

Unless you have a qualified retirement account with stocks inside it, you will have to pay up for every gain you have and for every dividend you receive. Therefore, your total return has to go above the taxes and the inflation.

5. Volatility is a real thing

In contrast to No.3, here we’ll mention a thing or two about volatility. Whenever a security goes up and then drastically down – that’s volatility. It often happens to stocks, and it’s a fast movement on the market. Unlike bonds, stocks are rather volatile, which is why they can rise in value over long periods of time.

Lastly, the final thing you should concentrate on is diversification. Most companies thrive over the years. However, if you own a significant amount of stocks in a soon-to-be disaster company, you will lose everything. Therefore, it’s best to diversify and hold a variety of individual stocks. That way, you can protect yourself from bankruptcy, and you will be less affected when a company goes under.

Posted by Judy Romero