Most people have heard of the stock market, but not everyone is familiar with what goes on in trading. For most people, purchasing stocks means buying pieces of ownership in companies that they believe will perform well over the long term, you can see it here.
When they sell their shares for a profit, they can save themselves some money by avoiding excessive brokerage fees and capital gains tax. For those who have never traded before, a few simple tips can help them get into the swing of things without any difficulty.
Identify Additional Fees
Ensure that you have an accurate brokerage fee before buying or selling any share. You need to know how much it will cost you per trade to calculate your profits easily. If you plan to use a discount broker, they may charge less than someone who charges transaction fees instead of flat fees.
Read News and Learn About the Company
Don’t fall for the hype! Just because the media is bombarding you with information about specific stocks doesn’t mean it’s essential information. There might be nothing wrong with a company at all; perhaps there has been no news released, and this is simply speculation from other investors. Use your judgement to make intelligent investment decisions rather than follow everyone else like sheep.
Use a Stop Order
A stop order is an order to buy or sell a security when its price reaches a certain point. This ensures that you won’t lose any more money than you’re prepared to and can help minimise your losses.
Diversify Your Portfolio
Don’t invest all your money in the same place. Spread your investment across different sectors and companies so that if one falters, you won’t lose everything. This will also help to smooth out the peaks and troughs of the market.
Use Limit Orders
Limit orders allow you to control the price you want to buy or sell shares. This can be helpful if the stock is not performing as expected or you simply want to buy stock but don’t want to pay the current market price.
Calculate Your Capital Gains Tax
If you’re selling any shares, remember that there could be capital gains tax on them. Work out how much you’ve made and what % of your income this will equate to so that you can budget accordingly and know if it’s worth selling anything. If it is a large amount, spread your sales over several years so that you aren’t taxed too heavily in one year.
Don’t Panic Sell
Panic selling when the market drops can get you into severe financial trouble. Share prices typically go up and down; even the best-performing companies have days where they drop 5% of their value. If you panic sell, you might lose more than just money.
Keep an Eye on the Market
Keep track of any news and trends in the market so that you can predict what will happen before it actually does, rather than after the fact. This way, your investments will be a lot safer, and you won’t make any rash decisions or lose money due to a lack of knowledge.
Trade Throughout the Day
Don’t wait for extended periods between each trade. The longer you leave it, the more likely it is that one company’s performance will have severely improved or declined by then. A good rule of thumb is to try and limit your trades to once per day at the most.
Be Cautious About Penny Stocks
Penny stocks can be great for short term investments to make a quick buck, but you shouldn’t expect any long term growth or stability from them. They are very risky because their share prices can literally double or triple overnight! However, if they’re not performing well by next week, you might lose everything. That’s why it’s essential to keep your portfolio diversified to minimise risk and allow you to sleep easy at night without worrying about what will happen if one of your shares tanks tomorrow.
