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Things To Consider Before Investing

Things To Consider Before Investing

If you have thoroughly no experience in investing on your own, getting started and being successful will undoubtedly be somewhat intimidating. It can also be quite difficult to determine, the amount of money should be in stocks and other types of investments. You should also see what kind of stocks you should look for and also be on the lookout for whatever kinds of rookie mistakes that you may make and avoid all of those. With all of that in mind, here is a list of 10 things all amateur investors should consider and keep in mind.

keep in mind

1. You should decide how much of your portfolio should be in stocks. There is actually no rule that is set-in-stone, but generally speaking as you get closer and closer to retirement, you should actually reduce your exposure to stocks because you will want to preserve your capital reserves. There is also a rule of thumb which you should follow; it states that you should take your age and deduct it from 110 to get the percentage of your portfolio that you should actually spend in the stock market and also the stock of your preference.

2. How many stocks should you actually purchase? If you just want to buy individual stocks, then you should buy at least 15 different stocks across a lot of different industries because you will want to diversify your portfolio. This might not exactly be practical when you are just starting out. An alternative that you can exercise is buying a lot of individual stocks and to invest the majority of your money into index funds and then buy 1-2 stocks with the rest. This will eliminate any guesswork and also allow you to get experience while evaluating stocks.

 
3. You have to choose between individual stocks and also index funds. An index fund actually allows you to invest in a lot of stocks by purchasing just one investment. For a good example, an index fund will give you exposure to all of 500 stocks in that particular index. Index funds are actually excellent tools to properly diversify your portfolio and also reduce risk at the same time. If your money is actually spread across hundreds of stocks and one stock crashes, then, the impact to your portfolio will undoubtedly be minimal and negligible.

4. How much profits can actually be expected? It is greatly advised that new investors take a long term view of the markets and not get disheartened when and if they don’t get a whole lot of profits when they start out. In any kind of given market, it could actually gain and lose a substantial portion of its value. We should be ready for anything and be steady.