5 Basic Things to Know before Investing in Stocks

The world of business and investment is growing all the time. Everyone is looking for something that can protect their wealth. They invest in various things to increase the value of their assets. There are bank deposits, bonds, gold, properties, and stocks. Stocks are one of the popular investment instruments and chosen by everyone. Even today, many teenagers are starting to invest in stocks.

But first, you should know that stocks are a high-risk investment instrument. Therefore, there are 5 things you should do before starting to invest in stocks:

1. Financial management

Financial management is important if you want to invest in stocks. You shouldn’t invest in stocks using all of your money, and don’t use the money you’ll need in the future. Instead, you need to use cold money in stock investing. Cold money is the money that is not really needed by you for now or in the future. Remember, you should never mix the money for investments with the money for other purposes.

2. Set profit and risk targets

You must determine your profit and risk targets that you can accept. The purpose of investing is to increase the value of your assets. Thus, you need to determine the percentage of the profit target you want and the percentage of the risk of loss you can receive. Remember, stocks are a high-risk investment instrument, so you should be prepared if something happens which will affect the stocks you own.

3. Don’t be greedy

This is among the most important things if you want to invest in stocks. Never be greedy! If the stocks you own have reached your desired profit target, immediately sell and look for more stocks that have the potential to add value to your assets in the future. Remember, profit in stocks would happen only if you sell your stocks. If you haven’t sold your stocks, then it’s just a profit on paper and the profit can be reduced if the stocks drop in price. That is why you should analyse on when to sell and buy stocks, and do not be greedy!

4. Learn about the company’s business

You have to know the business of a company because every business is different. Mining companies depend on mining commodity prices. If the commodity prices decline, the company profit will decline too. Remember, many companies have their own advantages and disadvantages, so we must carefully choose the right company stocks for us to buy.

5. Learn about fundamental analysis and technical analysis.

You must learn about fundamental analysis and technical analysis. Fundamental analysis is to determine the performance of a company by looking at the company’s financial statements. The financial statements of the company can provide us with the information whether its profits are growing or decreasing every year. If fundamental analysis focuses on the company’s performance, then technical analysis focuses on stock prices. Technical analysis aims to see the movement of stock prices, whether these stocks will go down or up. If we study technical analysis, then we can buy and sell stocks at the right.

For those who want to invest in stocks, these are the 5 basic things you should know. Stock is an investment instrument that has high risk but also provides high return. Do not forget or hesitate to invest because investment is the preparation for our needs in the future.