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3 steps an investor should take before investing

Updated on December 18, 2010

an investor that is just starting out on the stock market needs to take a few steps in mind before ever making an initial investment. I recommend reading multiple books and resources about the stock market.

So say as a young investor, you know what kind of strategy you want to implement. You might say for example, you like the idea of day trading. Which is of course the strategy of buying and selling multiple stocks all in the same day. (Sometimes in the same hour) So now what? RESEARCH! If you have picked this strategy, and you did some research, you would know you can not truly be considered by law a day trader unless you even at least hold a minimum of $25,000. You must perform multiple trades in a day (though this is not a requirement) You would know what kind of analytical techniques are necessary to learn.

Now a very good decision would be to make sure that you are trading with capital that you can afford to lose. Because I'm not going to sugar coat it when I tell you, you will probably lose money. Unless you are a lucky person, you will have lost trades. This is actually a good thing though. Ask any day trader, he has losing trades every day, BUT here's the difference, his winning trades out number the losing trades. That's a big part of the day trading strategy we picked as an example. You make sure you make small trades (no trade should take more than ten percent of your total capital) and you profit off of the small percentage fluctuations.

Of course though the whole point of all that was to give you an idea of the things you should be thinking of when you venture into the stock market. You need to literally think of all the ins and outs of your strategy, and you need to think about your own tolerance to risk and stress. Not every strategy is for everyone....

One more consideration, take long term investment...This could be an extremely boring strategy, and not a very short term profitable one for sure. With this strategy, however, you eliminate a lot of risk, a lot of stress, and a lot of time needed to research. I can tell you a couple blue chip stocks right now you could throw some money in and see a yearly return of maybe 20%

So to recap, observe yourself and what kind of trader/investor you are, pick your strategy, and then finally research the strategy as much as you can everyday. Do not neglect these 3 simple tips before investing

Please check my blog for more info on the stock market for young investors.


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      7 years ago

      This blog is really nice and informative. We are pleased to know this blog is really helping people.

      The explanation given is really comprehensive and informative. I am feeling happy to comment on this blog . I think this is useful information for blog users-How does the ordinary investor fit into the equation comprising of global factors coupled with manipulation in the stock markets

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