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Investing In The Stock Market? Read This First…

souqalmal.com logo souqalmal.com 22/02/2018 Ankita Singh

As an expat, you may be tempted to invest in stocks in your home country, if you haven’t done so already. But being a beginner, the deluge of information out there might overwhelm you. So, how do you get started?

While there is no single mantra for success, investing in stocks doesn’t have to be a gamble either. Below you’ll find some tips to help you navigate through the stock market, armed with the right mix of information and caution.

STAGE I: Before Investing…

Establish Your Investment Goals

First, you must clearly set out your financial goals – Building an education fund for your kids or building a retirement fund or maybe saving for a down payment… Next, you need to decide what time frame you’re looking at to achieve those goals. These will help you figure out how big of an investment you should undertake and what sort of a return you will need to fulfill your goals.

Understand Your Risk Appetite

Your risk appetite or risk tolerance may be based on your financial circumstances, personal commitments, age and a number of other factors. But before you start investing, you need to know how much risk you can take on without losing a good night’s sleep.

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STAGE II: Getting Started…

Know The Basics Of Investing

If you’re new to the world of stocks, and can’t tell your EPS (Earnings Per Share) from ROE (Return on Equity), it’s best to invest some time and learn the basics of investing. Take an online course or read a book to get smart about your latest undertaking. Not only will this help you understand how the stock market is, but it will also allow you to make sense of stock market news and headlines.

Think Long-Term

a man sitting at a desk in front of a laptop computer: stock market © Shutterstock stock market

Your neighbor may have made a profit worth 5,000 dirhams over a week, but that doesn’t mean you will too! Yes, short-term gains are enticing, but this sort of an investment strategy comes with its fair share of risks too. If you’re just setting out on your stock investment journey, having a long-term investment perspective along with patience and discipline is the way to go.

A short-term investment strategy is not advisable for beginner investors or anyone who does not have the background knowledge, risk-taking capacity, financial resources and ample time to actively trade.

Diversify Your Stock Portfolio

Diversification is not only important across asset classes – stocks, bonds, gold, real estate and so on, but is also important within a specific asset class, stocks in this case.

Seasoned investors will always advise you to not put all your eggs in one basket. Investing a huge chunk of money into a single stock will increase your investment risk exponentially. If the stock underperforms or goes bust, your investment will be wiped away in an instant.

[Related: What are Bonds and how are they different to Stocks?]

STAGE III: Staying Invested…

Leave Your Emotions At The Door

The right temperament for successful long-term investing is devoid of greed and fear. Greed and fear are two emotions most investors will experience at some point of time or another. For example, in a bullish market, many investors get greedy and rely on speculation to try and make a quick buck. In a bearish market, the same investors may get easily scared and are likely to sell their stocks for peanuts. The key is to not let these emotions steer your investment decisions.

Don’t Follow A ‘Tip’ Blindly

Whether you’re investing through a broker or going at it alone, you will come across ‘hot tips’ on a regular basis. These tips could come from your trusted broker, friend or neighbor, but don’t follow them just because the source seems to vouch for it. Rely on fundamentals, and actual research and analysis before you make a buy/sell decision.

Review Your Portfolio Regularly

You might have invested for the long term but that doesn’t mean you should invest your money and forget about it. Market conditions keep changing and your portfolio shouldn’t stay stagnant either. It is important that you monitor the performance of your investments and rebalance or adjust your portfolio if needed.

The post Investing In The Stock Market? Read This First… appeared first on The Money Doctor.

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