If you are new to stock market you need to understand the rules of the game. The financial planners or the lowest brokerage trading account companies advice beginners to start investing in mutual funds. For a beginner to make it big in a stock market there are some tips to follow.
Take things slowly
Before direct exposure a strategy is to test the waters. Now you might be thinking on how to do that. The answer to this is simple as there are numerous portfolio managers on the web. Just register a free account with any of the portfolio managers. Then you can formulate a dummy of stocks and based on your research inputs you can invest those dummy stocks. These points to the fact that you are slowly taking things.
Now try to figure out how your dummy account is performing in the next 3 months or so. You need to have a fair idea about the stock market and its volatile nature. Before actual investment you need to create a dummy account.
First stock purchase
The first purchase of stock needs to be from a sector that you are familiar. For example if I am working in a banking sector my knowledge about this sector would be more in comparison to other sectors. Do keep in mind that if a sector is not performing well it does not mean that the entire sector is having a torrid time. A proper research is suggested before you zero in a stock of your choice.
Do your own research and never listen to the advice of people
A lot of people end up investing in stocks based on recommendation of others. This is a wrong practice to adopt. Just be aware that past is history as each business goes through a cycle. It is suggested that you conduct your own research before you purchase a stock.
No point to diversify a lot
To get the ball rolling you can purchase 3 to 4 quality stocks. Ideally a balance is to be achieved and around 10 stocks should suffice. If you have spare money you can always invest in mutual funds.
No point to consider stock market as a money making module
Once you invest in stocks your objective is to triple your investment in the next 2 to 3 years. If such an expectation is at the back of your mind once you are entering the market then this is not the place for you. You might gamble with your money till you consider yourself to be really lucky. Being a stock investor you should specify your objectives before you take a plunge. In an ideal case scenario your expectation should not be more than 10 % to 12 %.
Last but not the least invests in a rational manner in the domain of stocks. Seldom people are governed by greed, emotions once they enter the market. The best teacher of the market is experience.