How Successful Investors Get RICH

Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' for FREE from The Successful Investor.

How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.

Topic: How To Invest

Getting into the stock market for beginners is easier with a sound plan

Getting into the stock market for beginners can feel overwhelming, but only if you go at it without the tips we share in this article.

As many of our readers know, I had the good fortune to get introduced to the stock market early in life, at age 16, when I got an after-school job with an investment writer. I learned a lot about the stock market in that job. More important, I gradually acquired a hypothetical pair of stock-market-sensitive goggles. To this day, I put them on whenever I tackle a stock-market related question.

When getting into the stock market for beginners, investors typically have modest amounts of money to invest. If you ask investors who have a few decades of successful investing behind them, most will talk about the value of everyday qualities like patience, consistency and a healthy sense of skepticism—in short, the kind of qualities that bring success in all aspects of life, not just investing. This is the key to stock investing for beginners.

How Successful Investors Get RICH

Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' for FREE from The Successful Investor.

How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.

Consider these four research tips for safer and more profitable investing when getting into the stock market for beginners

Stock investing for beginners can be much more profitable with these stock market research tips that will help you cut risk and increase profits in your stock market portfolio. We’ve long recommended these tips:

  • Look beyond financial indicators
  • Think like a portfolio manager
  • Hold a reasonable portion of your portfolio in U.S. stocks
  • Give your investments time to pay off

Stick to these stock market basics as your portfolio grows

You should aim to invest initially in a minimum of four or five stocks—one from each of most, if not all, of the five main economic sectors (Resources & Commodities, Finance, Manufacturing & Industry, Utilities and Consumer).

You can buy them one at a time or over a period of months (or even years), rather than all at once. After that, you can gradually add new names to your portfolio as funds become available, taking care to spread your holdings out as we recommend.

Learning when to buy and sell stocks for beginners requires going beyond charts and considering the random element

There’s a large random element in the stock market, as in human activity generally. If you react to stock-price changes impulsively or emotionally, you multiply the effect of that random factor.

It’s a mistake to buy or sell stocks just because they have gone up or down. That’s because of the large unpredictable element in stock-price direction. Investing in a random fashion almost inevitably costs you money in the long term.

People guess right on various topics every day. Random events like winning guesses tend to occur in bunches. However, nobody can predict the future with any consistency.

More tips for beginners:

  • Conflicts of interest have a big impact on what people believe, recommend, say and do. This is especially true if there’s money involved.
  • History never quite repeats itself in the stock market, but often seems like it’s about to do so.
  • A rising market climbs a “wall of worry.” Each brick in that wall—each new investor worry that comes along—could lead to a massive market decline if it continued for an unusually long period, and/or continually gains strength, rather than tapering off as most market worries do. That’s why you need to resist the urge to get out of the market during temporary downturns.
  • You need to be aware that at crucial times, the stock market acts as if it is going to do whatever is necessary to fool the largest number of people who hold strong opinions.

To succeed as an investor, you need to consistently follow investment practices that have paid off for large numbers of investors over long periods. If you take big risks—bet on long shots—you are likely to lose.

To make money in the market, you should only invest in stocks when you can afford to and intend to hang on to them for a lengthy period, perhaps two to five years. Your plans may change due to circumstances you can’t control, of course. But if you go into the market without committing to a lengthy stay, you are at risk of selling impulsively during the next short-term market downturn. Do that and you are likely to lose money.

Avoid frequent online trading when getting into the stock market for beginners

While online trading seems like an easy and convenient way to invest, it can also be an easy way to lose money. There are many hidden dangers that may not be easy to spot at first.

The main risks of online trading come from the fact that it all may seem deceptively easy. The lower costs and higher speeds of online trading can lead otherwise conservative investors to trade too frequently. As a result, you could wind up selling your best picks when they are just getting started.

Use our three-part Successful Investor approach for all of your investments, especially when getting into the stock market for beginners

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight.

What do you wish you knew about the stock market when you first started investing?

What is one of the worst mistakes you made as a beginning investor?


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