Tips for Beginners on Buying Your First Stock

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Before going out on total investment, here are advice tips. Those who do not have the opportunity to invest by themselves can find it intimidating. Sometimes, it gets hard to determine the amount of money you can part with when investing. Briefly pointed out are some common Cincinnati investment firms rookie mistakes guide worth taking into account.

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1. How much should your stock portfolio be?

There is no fixed rule when it comes to stock investment. Generally speaking, the older you get, the closer retirement beckons. To preserve your level of capital one must reduce their stock exposure. As a basic rule confirm your age and deduct it from 110 to arrive at a suitable portfolio percentage that will go into stocks. You can then adjust the number up and down while basing it on the appetite for risk.

 

2. Index funds versus individual stocks

Those investing in index funds can invest in several stocks by buying through one investment. Index funds form an excellent tool when diversifying your stock portfolio reducing your risk. When money is spread out across several stocks, this impacts your portfolio performance.

 

3. What stocks should be bought?

Those planning to buy several individual stocks will purchase 15 stocks across various industries with the intention of diversifying their portfolio. This might turn complex at the start. Another alternative to buying individual stocks is investing the lions share of your portfolio on index funds. This will remove the guesswork from investing while allowing the individual to achieve some experience from stock evaluation.

 

4. Are dividends worth?

Most stocks prefer to split their proceeds to their shareholders when it comes to dividends. Others prefer choosing their profits when re-investing in company growth. Generally, dividend stocks are less volatile when compared to defensive non-dividend stocks. Do not assume that all companies that pay more dividends automatically qualify as a better investment.

 

5. Expected profit

The consensus is to advise investors to examine long-term views of the market. The markets can abruptly shed a significant portion of their stated value. Over long time periods, the markets remain consistent.

 

6. Go with your gut when you buy

Before investing in a given company ask yourself do you understand what they do. If you cannot explain what they do in a single sentence, avoid it. Ensure that investment decisions are only based on a clear business model – especially the startups. It does not hurt to seek financial consultation advice from highly experienced market investors.

 

7. Look out for sticky points

When choosing the right stocks, here are some red flags to look out for. Avoid companies that barely make any profit. Stocks with stable share prices are in a constant drop as you examine the three to five-year charts. The same applies to any companies under investigation or riddled with huge debt.

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8. Factor in the level of volatility

Before buying a stock, understand their level of volatility. This can be done by comparing the volatility to market indexes, A beta of less than one shows that the stock reacts less to market swings. If greater than one, this indicates it’s more reactive.

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