Whenever you look at guides about buying and selling stocks, they typically tell you that you should buy stocks when they are low and sell them when they are high. However, the Stock market just reached an all-time high, and if you are seeking to invest in the stock market, you might be thinking that this is not the right time to start investing. With the economy coming back and the job market beginning to stabilize, this may be the perfect time to start investing in your future.
Slow and Steady Wins the Race
The stock market is a volatile place, and it is essential to curb your emotions and anxieties when investing. Deciding to invest a steady amount throughout long-term investing will allow you to win with your investments. However, this means that you need to keep your money in the market when it is down and at its highest levels.
When the market hits new highs and the lowest of the lows, people panic and pull their money from the market. Keep in mind that there are a lot of people who are work tirelessly to improve the market and enhance the overall economy. If you keep steadily investing your money in the market, not only will you keep growing your overall investment, but you will ride through any market fluctuations.
Avoid Owning Single Stocks
By investing all your money in single stocks or, another way to think of it, a stock of a single company, you are increasing your risk of losing funds. Single stocks are incredibly volatile, and the company’s health directly affects the price of the stock. Should the company that you invested in suddenly come upon hard times, the company can drastically decrease in value or cease to exist entirely.
Instead of investing your money in single stocks, find mutual funds with a long history of growth and good management. Yes, you will need to watch out for management fees, but you will have less risk over the long-term while your money continues to grow.
Avoid Investing Large Lump Sums
Suppose you find yourself suddenly with a large lump sum of money and are looking to invest it in the stock market. Rather than invest the whole amount at one time and hoping that it goes up in value, spread out your investment to cover six months or a year to give yourself an average cost basis. A cost basis is what it actually cost you to purchase the stocks that you own. When you average the cost basis, you factor in the highs and the market’s lows during that set time frame. An average cost basis should help you understand any future costs or gains.
Start a DRIP
A majority of stocks offer a dividend, where they offer a give back to the investor a small amount from the company’s profits. DRIP stands for Dividend Reinvestment Plan; any dividends that you receive will be reinvested with the same company. Within your portfolio, you can sign up for a DRIP, which is another way to increase your investment over time.
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