Here are some simple basics of stock market investing you need to know.
If you want to start building wealth, you need to start saving.
A lot of people struggle with this but it’s a crucial step toward investing success and creating wealth.
If you don’t save, you won’t have any money to invest in the stock market anyway.
2. Risk and Reward are Connected
Firs, you must understand that any investment you make in the stock market carries with it at least some degree of risk.
This is true even when investing in so-called “blue chip” or “value” stocks of big, established companies like IBM, GE, or Microsoft.
There is NEVER a guarantee when investing in the stock market.
And the more potential for a high rate of return, the more risk you’ll need to take.
3. Be Realistic About Investment Returns
A lot of people who skip learning the basics of stock market investing do not have a realistic outlook about expected rates of return on stocks.
They cherry pick certain examples of stocks that have done really well or listen to friends about a stock that did 112% in 6 months.
So they expect those rates of return all the time.
It just doesn’t happen that way.
So keep your expectations of your rates of return realistic.
Don’t hang your retirement calculations on a 20% rate of return. Or even 10% for that matter.
Unless you or your broker is a phenom when it comes to timing the market, don’t have all your money in one stock or even one asset class.
If things turn south for that company or asset class, you’re in a lot of trouble.