7 Tips for Smart Stock Investments

Savage Villoch Law, PLLC
03
Apr

In the past 70 years, stocks have risen more than 1,000 fold.

No one can say for certain when stocks will collectively rise or fall. This means there’s never a better time than the present to get in the investment game.

But before you start putting your hard earned money into this risky game, there are a few tips for smart stock investments that you need to know. Keep reading to learn the tips and how they can help you succeed in the stock market.

1. Never Invest What You Don’t Have

Whether you’re new to investing or you’ve recently become hooked and are looking to grow your investment, it can be tempting to borrow money to buy stocks.

But when it comes to making smart stock investments, buying on borrowed money is a huge mistake. Taking out a personal loan or bumming borrowed cash from family and friends makes an already risky investment even more dangerous.

Not only will you be risking losing cash, but you could also risk defaulting on a loan and hurting your credit. Or worse, you could be defaulting on your friends or family, which can damage your relationships beyond repair.

You should only get into the investment game if you have assets to invest that isn’t needed for other basic costs. Investing is never a way to get rich fast. Even if you are investing only your own money, if it isn’t surplus income, don’t invest it.

Risking the cash you need to cover rent or pay your bills, even if you invest in a stock that’s on the rise, will put you in a bind when you need cash fast at the end of the month.

2. Cut Your Losses

If you’ve invested a lot of money in a single stock, or if you only have a few initial investments, it can be tough to cut your losses on a stock that falls beyond hope of bouncing back.

After all, finally selling out at a loss means admitting defeat.

But the opposite means holding onto a stock that is only going to continue to decrease in value. Selling out before it hits rock bottom means recouping some of your costs.

The earlier you cut your losses, the more you’ll get back. That means more money to try again by investing it in another stock.

This can be one of the toughest of the tips to learn about making smart stock investments. If you don’t have a lot of experience with stock, it can be tough to judge when a downward fall goes past the point of possible recovery.

Trusting your gut and not getting too attached to an investment can help. Staying attached for too long can lead to disaster.

3. Skip High-Fee Investments

Hedge funds run by a high-fee fund manager who is further investing in hedge funds can be tempting. They boast big numbers that can make it look as though its impossible not to earn a big return.

But don’t be tempted. Low-cost fund tracking may feature smaller numbers, but they can lead to much higher returns over a longer period.

Another tip for smart stock investments that will appear later on this list explains why getting in the game for the long run from the start is a must if you want to succeed. Low-cost fund tracking over high-fee investments will cost you less upfront and help you earn more long-term.

4. Don’t Risk Too Much on a Rumor

Once you start investing, every investment expert in your family or group of friends is likely to come out from hiding. Everyone you meet will want to tell you what to invest in. They’ll claim that they have a tip that will help you win big with the right investment.

Good tips can definitely help you snag a low-cost stock that’ll start skyrocketing soon after you buy in. But legitimate tips can be tough to come by.

Listen to every tip with a level head. Look for clues that the tip could be credible. Try to verify the tip with another amateur expert or online.

If you can’t find evidence to back it up, it’s better to pass on the opportunity than to risk it all on a rumor.

5. Stick to Your Strategy

When you start putting these tips for smart stock investments to work, you’ll want to create a strategy for your investments.

Your strategy could be to buy large amounts of a few stocks and leave your money to rest. Or it could be to buy smaller amounts and sell as soon as the stock grows by a certain amount.

Whatever strategy you choose to put in place, stick with it even when the going gets tough or a temptation comes along.

Forgoing your strategy will only leave you upset and regretful when something goes wrong. If you’ve stuck to your strategy, you can’t get disappointed for missing an opportunity. Keep sticking with it and you’ll get the next one.

6. Be in It for the Long Run

For new investors, it can be tempting to sell out as soon as your stock sees a small rise. For some investors, the same goes for a small fall.

But if you want to enjoy true success in the stock market, you need to learn to be in it for the long run.

7. Avoid Falling for the Draw of Penny Stocks

Penny stocks are inexpensive to buy, allowing you to buy up large amounts with the same amount of money that would buy you just a few more expensive stocks.

But these less expensive stocks also see smaller returns. They are often riskier because they are smaller, newer, or riskier businesses. More expensive stocks are often associated with older, successful businesses that have a much longer way to fall.

Putting These Tips to Work for Smart Stock Investments

Whether you’re new to investing or you’ve been in the game for a while, any of these tips for making smart stock investments can be vital for upping your game and buying/selling your way to success.

Another smart investment tip is to always be prepared for a disaster. One great way to prepare is by having an investment loss recovery lawyer on hand just in case.

Whether you’re already involved in a major loss or you just want to be prepared, contact us today to talk about investment loss recovery and the legal options you have.