Stockbroking for Beginners
When you hear the word “stockbroker” the images that flash into your mind may well be those of a besuited business shark prowling Wall Street sniffing for fortune and gain. Popular culture has painted the stockbroker as an alpha male character, ruthlessly stepping over anyone who gets in his way in order to make money. The success of movies based on Wall Street such as The Wolf of Wall Street has made the idea of stockbroking a very attractive one and a lot of people are now feeling tempted to dip their toe in the stock market. Before you remortgage the house or pour your life savings into a sure thing take some advice from those in the know.
Advisory services online are an extremely valuable tool for fledgling stockbrokers and many, such as CMC Markets, can help you make decisions when in the early stages of your trading career. If you take nothing else from reading this then take heed of this. These people are professionals with experience, something that could be the difference between making money and losing the shirt off your back.
Firstly, only invest what you are comfortable losing. This is a common adage in the world of stocks and it is this way for a reason. There is a thin line between stockbroking and gambling and be aware that you could lose it all. For this reason have an investment ceiling and stick to it.
Don’t put all your eggs in one basket. This old cliche is given a new vitality when applied to the world of stockbroking. If you plunge your savings into one company which is subject to the whims of a CEO or the fickle consumer then you are exponentially increasing your risk. Seasoned professionals have a varied portfolio for a reason and the reason is security. Spreading your buys over a few different companies in a few different industries will make it less likely that one catastrophe will clear you out completely and make your portfolio more resilient in the face of a turbulent and changing market place. Obviously if you have an area of expertise then it might be a good idea to weigh your investment in favour of this market but security beats expertise every time.
Once you have decided your limit and taken the plunge of buying stocks the next piece of advice would be to be patient. Maybe you have bought in at a bad time for the market and your stock is on a slight downward trajectory. Don’t panic and immediately sell up. This could be a short-term dip and your stock may find itself on an upward trajectory before soon. This is the time to trust the advice you have been given, and to try to resist the urge to panic sell. A good rule of thumb that is given by a lot of professionals in the business is to leave your investment alone in the medium term. Only the very lucky will make a big gain in the short-term and you will more than likely not make your fortune in the first six months of stockbroking. At least three years is advised and if you can wait over five years then you may see your stock begin to bear fruit. A good investment needs time to develop so don’t give up if you haven’t become a millionaire in a year.
If you are getting into stockbroking as a hobby expecting to strike it rich immediately and retire in a year then you should temper your expectations. Those who make money in the stock market are usually professionals with a wealth of experience and knowledge and often they are not investing with their own money. If you are investing your life savings or your children’s college funds be aware that the rewards are there but the risks lurk below. If you have expert knowledge in an area of technology or industry then you might have the upper hand and this could be the key to making money but if you are a hobbyist investor looking for more return than a simple savings account will give you, talk to the experts before you make any decisions.