Investments in stocks and shares have historically been one of the most lucrative methods of wealth accumulation, often returning significantly higher rates than savings and bonds. Although, Nevertheless, investment in the stock market on any scale is often complex and beginners should take the time to thoroughly understand their strategy and identify their strengths before taking their first steps into investment.
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If you are thinking of trying your hand on the stock market then it is vital that you do not underestimate the importance of research and planning. While it is not necessary to be able to predict the future, a clear understanding of the workings of an industry and the companies contained therein allows even complete novices to somewhat accurately predict the performance of a given corporation. The reason for investing is to make money and we all know that the current strengths of a company as well as their future prospects will determine whether their share prices are going to rise or fall. High growth markets and clear expansion plans are trends that you can learn to identify in order to be able to spot the stocks that will make the most money.
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Another thing that beginner investors need to do is to watch how current investments are progressing. It is not necessary for a beginner to start watching news wires all day or tickers but it is a good idea to keep a watchful eye on the company they have invested in so that they can adjust their holding according to any variations whether they are positive or negative.
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Novice investors should also be acutely aware of diversification. Even in a very stable market, there can be wild fluctuations of valuations and stock. Regardless of the initial amount invested, fledgling portfolios should attempt to spread their capital between mostly dissociated industries in an effort to absorb volatility and increase overall capital appreciation. While crises among one or two companies rarely cause an entire market to crash, knock-on effects are almost always felt among businesses within a similar sector. It can therefore be much more comfortable to offset losses somewhat through small profits on unrelated stocks than watching entire portfolios rise and fall together.
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Conversely, as a smaller portfolio grows, there can be some value in eventually investing in other companies related to those that are performing well. It is good to be able to monitor certain groups in terms of news and development provided you have enough diversification in your portfolio.
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New investors should always seek to keep their cost base low and accept as much assistance as possible, usually in the form of a trading platform. Those entering the stock market for the first time will find these platforms very beneficial despite the fact that they work on commission. Investors would always prefer to have most of their money for investment purposes so that is why it is a good idea to research these platforms to ensure you get the best deal in terms of fees.
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Overall, the keys to succeeding as a new investor are strategy and information management. A fully prepared investor who can assimilate and utilise key data has immediately set themselves on the path to success.
Source: http://www.growthstockinvestment.com/2012/02/06/beginner-investors-and-some-great-tips/
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