To the uninformed, the stock market is a scary, intimidating place where people lose their life savings and corporations run wild. Most of the time, this couldn’t be further from the truth.
Sure, people make dumb decisions with their money and companies can do some pretty shady stuff. Yet by simply learning about how the stock market works and not being careless, anyone willing to put in the work could potentially see their money increase over time.
But where do you start? Our big brothers at StockTwits recently asked this very question:
Let’s talk long-term investing! What should new investors know? What would you tell a 21-year-old with only $1,000 to trade?
Investors and traders from all walks of life gave hundreds of responses, all with their best advice to stock market newcomers. We distilled these answers to the ten best tips for investment newcomers. Whether you just dipped a toe in the stock market or merely thinking about investing in the future, these are the ten things you absolutely need to know to get started.
1. Educate Yo Damn Self!
Callum_Thomas shared an idea on StockTwits
Putting money into the stock market is nice and all, but not knowing the basics of how the market works could be your undoing. Fortunately, we wrote some pretty handy resources to help you get started.
2. Be patient AF.
kcphaeton shared an idea on StockTwits
You should not go into the stock market with the purpose of cashing out in the near future. The smartest investors put away money for years and watch it grow. If your stocks go down, there’s always a good chance they’ll go back up again.
3. Learn about risk.
EVplusEV shared an idea on StockTwits
Investing comes with a certain degree of risk. If you learn about these risks and figure out how to or manage them, you’ll save yourself from losses in the future.
4. Avoid penny stocks like the plague.
@Stocktwits stay away from penny stocks.
Penny stocks are highly volatile and trade on an unregulated market. This could mean massive losses, fraud, and a whole bunch of nastiness. Don’t even think about investing in penny stocks!
5. Everybody loses at one point, so don’t fret.
Stocks go up and down constantly. If you buy something, it’s not guaranteed to go up. If its value goes down for a bit, don’t panic immediately and sell it at a loss. Instead, keep a close eye on it. It could increase over time and become more valuable. If it doesn’t increase after a year or so, only then should you consider selling it off. If you buy penny stocks, however, you have a higher probability of losing money.
6. Learn from your mistakes.
nftrh shared an idea on StockTwits
Making a bad investment and losing money stinks. If you’re smart, you’ll see why that investment was bad, how it lost money, and how you can prevent from making that choice in the future. Since there’s no right way to make money and invest, “learning on the job” is part of the stock buying experience.
7. Don’t put all your eggs in one basket.
By investing in more than one stock, or “diversifying your portfolio,” you can decrease your risk. For instance, if one of your stocks does poorly and another stock performs well, you’ll essentially avoid losing the money you started with. If you invest in several different stocks and securities, you also have the chance to see which of your investments performs better than the rest and invest more in that security later.
8. Buy an index fund.
HaramiTrader shared an idea on StockTwits
Vanguard has some pretty interesting index funds, including $VOO. These funds are relatively low in risk, have incredibly low fees, and historically increase over time. They’re a lot safer than buying a single stock. (Be sure to read our guide to learn more about index funds.)
9. Avoid crappy advice.
Most people have no idea what they’re talking about when it comes to the stock market. Avoid listening to any jerk with a “hot tip” and listen to the experts instead (like us!).
10. The one rule to live by (maybe).
es3178 shared an idea on StockTwits
You don’t always want to buy a stock when it’s at an all-time high. It’s often best to invest when a stock goes down. This could help you, the budding investor, capitalize on a stock’s rough period and make some sweet gains when it goes back up.
There are a million and one rules to live by on the stock market, and doing your research is essential before you buy a single share. If you educate yourself and stay informed on the latest market news and trends, you could save yourself from some major risks — and see your money make money in the long run.