The stock market is among the most attractive investment destinations for discerning young investors. People can grow their wealth by smartly investing in the stock market. However, making hasty decisions can also quickly cause people to lose their money. As Kavan Choksi Professional Investor mentions, beginners need to follow a systematic process for investing in the stock market to ace their investment journey and grow their wealth.
Kavan Choksi Professional Investor discusses important steps that beginner stock market investors must follow
By regularly putting money aside to invest in the stock market, one can see its value multiply over the long term. This is the reason why it is important to start investing as soon as one has enough funds to do so. Here are a few basic steps newbie stock market investors should follow:
- Step 1: Set clear investment goals: One should start by reflecting on what they wants to achieve financially by investing in the stock market. Investors may have short term goals like saving for a house or a car, or long term objectives like financing the higher education of a child or ensuring a comfortable retirement. The objectives shall depend on the life goal and stage of the investor. Younger investors generally focus on long term wealth accumulation and growth. On the other hand, people whose retirement years are getting closer tend to prefer income generation and capital preservation.
- Step 2: Determine how much one can afford to invest: Determining how much money one can afford to invest in stocks requires a careful and honest assessment of the financial situation of the investor. It doesn’t matter if a newbie investor has limited funds. Stock market investing is a marathon, not a sprint and an investor would have a long way to go.
- Step 3: Appraise tolerance for risk: Gaining a good understanding of one’s risk tolerance is vital to investing. Investors should try their best to gauge their level of comfort with the inherent uncertainties of the stock market. The risk tolerance of an investor would rely on their financial goals, life stage, as well as financial cushion for potential losses.
- Step 4: Determine the investing style: Each and every person has a distinctive relationship with money, which would not only impact their risk tolerance, but also their investing styles. Certain investors prefer an active role, and meticulously go through every aspect of their portfolio on a regular basis. On the other hand, a few investors opt for a hands-off, set-it-and-forget-it approach. The trading style of an investor may evolve over time, as per their requirements.
- Step 5: Pick the stocks: Newbie investors should look for stocks that have a strong track record, stability, as well as the potential for steady growth. It is not a good idea to start out of the gate with a risky stock. To invest for the long term, one must go slow and steady, not fast and rash.
As Kavan Choksi Professional Investor mentions, beginners should ideally start investing in stocks with a relatively small amount of money. They must properly do their homework to determine the investment goals, risk tolerance, and the costs of investing in stock, prior to starting the investment journey.