Understanding the Stock Market

by Jason Butler on March 13, 2017 · 1 comment

Understanding the stock marketA couple of weeks ago, my Facebook timeline was full of stock market chatter. Many people were discussing Snapchats IPO debut. People were wondering whether or not they should invest in some SNAP stock. I watch people make decisions even though they didn’t understand fully what they were doing. Some people know how the market works, but a lot of the people on my timeline discussing SNAP didn’t.

The lure of the stock market can be strong. Many people have dreams of making a quick flip with it. Honestly, who wouldn’t want to make money by investing and reaping the profits from it? It is just as easy to lose money on the market as well. I know some people have already lost a little on SNAP. When it comes to stocks, you should always take the time to learn and inform yourself. The info in this article can help you to develop a winning investment strategy.

Anchoring

Pay attention to where you anchor. Anchoring is when you stick to a main point. Many folks anchor on the price that they paid for the stock. They measure their performance based on this number. Remember that stocks are priced on estimated values of cash flows that business will create in the future. This is where your focus as an investor should be. While the price that you paid for the stock is important, it shouldn’t be the primary focus.

Pay attention to emotional trading

Be sure to watch out for emotional trading. The stock market can become emotional from time to time. There is a lot of money involved. There is not an investor in the world who hasn’t let their emotions get to them every once in a while. If you let your emotions get the best of you, you could be opening yourself up to impulse buying and selling. Many times that could lead to significant losses. Take a break, relax and try to keep your emotions out of your trades as often as possible. Don’t be afraid to step back and review your options for a minute before you take action.

Have a stock in mind

Set an investment goal based on how long you plan to remain in the stock market. If you intend to remain in the market for a long time, longer than ten years, you should be able to invest more. If you are a person that may start taking the money that you want out in five years or less, you should invest less. It will reduce your overall risk. A lot of stocks will take time to build in value. That will give you bigger returns.

Strategy

Before you begin trading, be sure that you have an investment strategy in mind. Too many people jump into trading feet first. That’s what I think happened with SNAP. I don’t think enough people had a strategy in mind. Who knows what could happen with it long term, though? Do your research and have a plan or reasons that will cause you to buy and sell. Make sure you stick to it. Don’t buy and sell on a whim. You could lose a lot doing that.

Learn the language

Take the time to learn the terms that are associated with the stock market. Before you invest one dollar, spend some time studying terms in books, magazines, newspapers or online. That will help you in the long run. Knowledge of those terms is critical to understanding the news and rumors about the stock market. That will help you a lot when it comes to your investment strategy.

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{ 1 comment… read it below or add one }

1 Mrs. Picky Pincher March 14, 2017 at 11:09 am

Huh, this is good to know. I’m not into investing yet since we’re paying off our debt, but heavy investing is in our sights once we achieve debt freedom. It’s not as complicated as people think it needs to be, though. You can arm yourself with knowledge before you invest, but I think the best way to learn is to dive in.

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