7 things to know before you invest in the markets

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investment

If you’re a first-time investor, one of the most attractive ways to generate profits is via the financial markets. However, it can be a high-risk strategy, and many beginners learn the hard way – by sustaining losses they can’t afford. So, before you sink all your hard-earned cash into shares or forex trading, follow these 7 rules to keep you safe and maximize your chances of success

Rule 1: Do your research

The stock market is no place for optimistic amateurs. The key to success is to let the data drive your decision-making.  Start by finding the best stock research app.  Webull and others not only provide great information, they may also offer a low-cost trading platform, a free trial while you learn the basics, and even free stocks on joining.

Rule 2:  Get real

The markets are not money-generating machines. According to research, to generate $1000 per month, you’d need to be prepared to invest at least $100,000. And even then, that return isn’t guaranteed. Compare that with high-yield bonds offering returns as high as 6% to 8% with less risk than stocks.  

Rule 3: No room for emotion

Investment expert Paul Samuelson once said: ‘If you want excitement, take $800 and go to Las Vegas’. Investing is serious, sometimes boring and there’s a lot at stake. Buying and selling emotionally is the quickest way to lose everything. It will lead you to make poor decisions and to act at the wrong time. That’s why successful investors increasingly use AI to inform their decision-making.

Rule 4: Only invest what you can afford to lose

Every trader, without exception, has to be prepared to accept losses at some point. That’s why you should never invest at a level that would affect your standard of living if everything disappeared within moments. The temptation to leverage your trades and generate higher profits is strong, but it can also lead to catastrophic losses. It’s better to stick to modest gains at a lower risk.

Rule 5: Don’t get swept up by the crowd

 A disciplined investment approach will protect you in the long run. It will stop you from throwing money away by chasing stocks that are experiencing massive price increases or panic-selling those going down in price. 

Let’s go back to Rule 1: a good market-research app will provide the historical data and forecasting you need to make cool-headed decisions and avoid the herd mentality.

Rule 6: The value of your portfolio will fluctuate

Investing in the markets is a long-term strategy. Expect the value of your portfolio to fluctuate over time. It will be affected by macro-economic circumstances as well as your decisions.  The key is to stick to your strategy and look for sustainable long-term gains.

Rule 7: Diversify your portfolio

It’s wise to use the expertise of professional managers by investing in mutual funds with a low entry point and reasonable running costs.  Not only do these professionals have a wealth of data and experience to create the best returns, by spreading your investment between several funds, but you’ll also lower your risks.