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Far too many people
are still sitting on the sidelines and are hesitant about investing in
the stock market. Because of their strong aversion to risk and the fear
of loss, they are watching opportunities pass them by. The stock market
can seem intimidating for the new investor and for those who have had a
bad experience in the past; but it needn’t be. Here are a few tips as
you consider investing:

Set yourself clear goals

Before you put any
money down at all, set yourself clear goals. These may include funding
your children’s education, making a down payment on your new home or
saving for your retirement. The best way to navigate the investment
environment is to have set goals in place and a clear plan on how to
achieve them. If you have set yourself clear goals, your focus will
largely be on accomplishing them and your plan will provide you with
direction on how best to invest your money. Investing is a journey
towards achieving your goals.

Build your knowledge

One of the best
investments you can make in yourself is to take the time and trouble to
improve your knowledge of investing. There is a plethora of information
and research by professional analysts and experts, which will be a good
guide. Investment seminars are also available that can develop you and
point you in the right direction. Resolve to take some time to educate
yourself. You will be surprised to see how much you can learn in a year.

How much risk can you take?

How much risk can
you endure without staying awake at night? Sometimes you do need nerves
of steel to sit tight when the market dips sharply. It is important to
be aware of your attitude to risk and that stock market investing comes
with risk. Stock market investments are not guaranteed. This means that
although you are likely to make money over the long term, you can lose
your investment.

If you can’t bear
to take much risk and would be devastated by any loss, it is best for
you to put only a small portion of your investible funds in the stock
market and the balance in money market investments.

Invest for the long term

How much money can
you really afford to put away for say five years and beyond? When you
think of investing in the stock market, adopt a long-term strategy
rather than looking to make a quick profit. Avoid investing more than
you can comfortably afford to be without during your time horizon.
Historically, stocks have generally outperformed other investment
classes over the long term. However, in the short term, the market can
be unpredictable and carry a greater risk of loss.

Diversify

“Don’t put all your
eggs in one basket!” Don’t put all your money in one stock and don’t
invest in stocks alone. When it comes to buying shares, diversification
is essential. Instead of investing all your money in just one or two
companies, its best to diversify by buying shares in different
companies and sectors.

Get professional Help

Most of us do not
have the time or expertise to make sound investment choices without the
help of a professional. Professionals have the expertise and an
enormous amount of information with which they can make well-informed
decisions and guide you appropriately.

Don’t jump on the bandwagon

When you make an
investment, you should know your reasons for doing so. Relying upon
every rumour or tit bit from your friend or neighbour is tantamount to
gambling.

Invest regularly

Allocate a part of
your investments in a systematic investment plan. Instead of trying to
time the market, invest on a regular basis say monthly, or quarterly in
an appropriate vehicle, and even when your finances are stretched.

Invest in Mutual Funds

If you are new to
investing or don’t have that much money to invest, a mutual fund may be
the most convenient way to invest. A mutual fund pools investor’s funds
and manages them in stocks, bonds, money market instruments, etc. The
benefits of mutual fund ownership include the wide variety of
investment types to choose from, having a diversified portfolio of
stocks, bonds and cash, and having access to professional management,
usually the prerogative of substantial investors.

Buy low-sell high

This seems so
obvious but many investors often do the exact opposite! They jump on
the bandwagon and invest when the market is already rallying. Once it
reverses, they panic and sell. If anything, this should be considered
an opportunity to invest in strong companies at bargain prices. A
market decline is not the time to panic and sell, but rather to take
advantage of the lower prices.

Be realistic about
your expectations of the stock market. If you set reasonable long-term
profit expectations for your investments, you will be more accepting of
the inevitable periods of volatility. If you stay the course and
continue to build upon the foundations of a sound investment strategy,
you can come closer to your financial goals. Depending upon your
particular circumstance, your age and time frame and your overall
financial plan, do consider putting at least some portion of your money
in the capital market; it still offers the best prospect of real long
term growth.