Everyone wants to be a Warren Buffett and make millions of dollars by investing their money in stocks. But just as there is a road to the Promised Land, there are also roadblocks and obstacles on this road. Not everyone gets rich quick (or rich at all!) and there are several risks that you must be well aware of before you begin to dip your toes into the volatile world of the stock market. There are ways to go about making a profit even in a fluctuating market though, but it can be difficult even for the most experienced stockbroker to make the right moves at the right time. There are a very little right and wrong in the stock market, it’s just a question of timing it right and not relying on the forecast someone has made. Make your own analysis based on future earnings and other indicators and this will assist your own decision making. Follow these steps to conduct your own analysis.
Clarity is essential
What exactly are you looking for, long-term or short-term profit? Ascertain this before anything else as this will decide your trading methods and aims. Clearing this up also helps you decide which stocks to buy. You don’t need to be proficient at reading a company’s annual report to ascertain its viability; looking at its performance is a reasonable indicator of risk and viability.
Read the signs
There are certain charts you should become familiar with reading if you want to become financially adept. Reading these will allow you to understand how poorly or conversely how well a company is doing. Observing this over a period of time will help you notice trends on your own and help you become a more knowledgeable and capable investor.
Watch like a hawk
A common error is to start keeping an eye on the market only once you have sunk your own hard-earned money into it. Wisen up to the ways of the world and keep an eye on things well before you have invested your money because you have then a backlog of knowledge, an understanding of how things work. It is this that will be vital for you going forward.
Don’t make the cardinal mistake of putting in large sums of money as your initial investment. Earn your stripes over time investing small amounts and once you have a sound knowledge of the markets start to put in bigger sums of money.
Pick and choose stocks across different sectors so that you have a portfolio composed of myriad stocks. This way you spread the risk around and don’t have too many eggs in one basket, so to speak. This way, even if you lose in one place you have other stocks to hold firm for you. Trade sensibly and the world is your oyster, stocks can offer terrific returns but only if chosen and traded in wisely.