The most attractive feature for people to put all of their cash in banks is that they offer rates of interest which vary between current accounts and saving accounts. Depending upon their usage and cash demands, people choose between these two types of accounts but these days the rates of interest on bank accounts are paltry and you will not be able to earn as much on your cash as you might be able to with certain other alternatives.
Nowadays a number of people are exploring the stock markets which if you can understand fully, you can earn quite a bit of money on your investments, much sooner as compared to bank account returns. The only drawback that keeps people away from the stock market is the element of risk because when people do not invest their money properly, they are more at risk of losing money. Sometimes people also have bad stock market experiences when they buy when the market is at its peak and sell when it is at its bottom. This is why we have compiled some very simple and easy to understand rules that will help you to navigate the stock market, understand how to read the trends and even be able to make predictions about the market so you know when to invest in the market in order to reap the most returns.
1. Research extensively – It is extremely important to do your research about the stock market you are about to invest in. In fact, it is a good idea to do your research from multiple sources in order to understand the trends of the market. Take at least a few weeks to do research and take advice from the experts. Try to pick and select a few companies whose products you believe are bound to do well and whose strategies you find are attractive. For your convenience there are multiple websites present on the internet that can help you make comparisons and analysis. A number of experts believe that historical trends and performances of companies is one of the ways to determine the future performance.
2. Diversify – Investing in the stock market definitely has risks associated with it so you should diversify your risks by investing in different markets, mutual funds and bonds. One rule you can follow is not to invest more than 10% of your total portfolio in any one stock or investment. You can also invest in different geographic regions especially if they are expected to prosper economically.
3. Reinvestment – Most of the time, most portfolios tend to grow because of dividends that were reinvested rather than appreciated stock prices. So look for stocks with solid dividends that you can reinvest.
4. Monitor your investments – It is very important to regularly make comparisons of your investments with the market index, sometimes if your investments are doing well, you might want to cash in the profit. But if you are looking for long term returns and you have an idea that your investments would continue to do well, then you should let the investment returns grow for a longer period of time. If your investments start doing poor then it is a good idea to cash them out while the loss is low before allowing it to grow into a bigger loss.
5. Contrariness – Whenever the stock market is low, try to buy stocks and when the stock market is high, you should try to sell stocks and invest in property and bonds.
Diversification as well as understanding the market as much as possible can help you make a stronger portfolio with more returns than savings accounts in banks.
Author Bio – Richard Jacobs is a chief editor since early 2007, and he currently works for MyDUIattorney. A website that helps you to find the right DUI lawyer, you can search for a Orlando DUI Lawyer online, anytime!
Photo Credits: s_falkow
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