If you are thinking of investing your money in shares, then you need to first educate yourself on the stock market itself. While it may be tempting to simply pick out a well-known name like Apple to invest in or to open a trade according to something you read online, that is not a wise approach. To see success in the long-term when trading shares, you need to know what you are doing and what to look out for. This will see you not only open trades that you are confident will work out but will also assist in managing your share portfolio effectively.
Even if you have been investing in shares for a while, you would still be well placed to continue learning all you can and having the essentials down. Having a thorough understanding of all that trading here involves will allow you to make it a success and see your money working for you in the best way.
What essential factors should you know about?
When it comes to trading shares, there is lots to research to do. Here are some basic essential guidelines to help:
- How it all works – before you even think about investing any money in shares, you need to get a firm grasp of how the market works. This will allow you to not only determine what happens each day but also the process behind investing in it. It will also aid you in setting up a robust investment strategy to follow to find shares to invest in. Finding out what to look for in any investment and all the market terminology amongst other things will help you in your investment career.
- News is crucial – in essence, a lot of what happens in the stock market is other traders reacting to the latest news on a sector or individual company. This makes it vital for you to keep up to date with any news each day that might affect your investments. It is also key to actually analyze the news also to see how it might pan out in term of any shares you hold and if you need to take action. The best share trading analysis will allow you to work out what is going on during the day and also where the markets might head into the future.
- Filings – one secret but very handy thing to know about is the public filings that companies make with the SEC. These are publicly available reports that companies send in that tell you their financial situation, any risk factors and the general health of the company. Of course, this is just the information you need as an investor when deciding on a trade.
- Remember tax issues – one thing that many share traders don’t consider is that you will be hit for short-term capital gains tax at anything up to 36% if you hold any trade for less than 12 months. After 12 months, that is not the case and you only pay standard tax on it. That is well worth knowing before you start trading as it can save you lots of money overall.
- Don’t get caught up in individual share price – this sounds a bit crazy as surely the price is what it is all about?! While this is true, the message here is that the current share price should not be the main factor in whether you invest in a company. Just because a share is cheap at $10 doesn’t make it a good investment as it could fall further. Similarly, a $100 share might seem expensive, but if you feel it is sure to keep rising it could prove a great investment.
- Consider long-term trading – although it is possible to trade intra-day, it really is better to know that holding trades for the long-term generally works out better. Not only do you avoid the above tax issue, but it is less hassle for you. In addition, trading long-term allows for the company you invest in to ride out any storms and for the price to head back up.
Get educated for trading success
As with any financial sector, knowing what you are doing before you do it is vital. This will not only see you make better decisions but also give you more chance of long-term success as a share trader. If you follow the above tips, then you should have a great start in covering the essentials and looking for the best shares to invest in.
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