There are a lot of lessons that investors can learn in the stock market, especially from small stocks. The lessons that an investor can learn from shares worth 20 cents or two dollars, cannot be learned from buying shares in major companies such as “Apple” or “” IBM“.
Regardless of the type of company or share price that the investor may buy or sell, he needs to know many things to avoid losses and to increase profits.
10 tips for investors
1- Reducing losses early
It is normal for stock prices to fluctuate, but when the stock price drops significantly beyond the loss limit set by the investor in advance, then he must sell the losing shares early before the losses increase.
2- Keep profitable stocks
When stock prices start rising, many investors sell them for quick gains, then regret it when stock prices keep rising.
To avoid selling profitable shares early, the investor must constantly re-evaluate the company, and if he finds that it is experiencing growth, and is achieving increased revenue, then he must keep its shares for the long term.
3- Avoid buying more losing stocks
Most investors try to compensate for their losses by investing more money in the declining stocks. For example, if the value of the shares decreases by 30% or 50% after the investors buy them, they buy more shares, thinking that this may compensate for their loss, except That this big mistake could cause them more losses.
4- Invest more money in profitable stocks
If the investor buys shares, and their price starts to rise, and finds that the company is performing well, then he should invest more money in the shares of this company, because its price is likely to continue to rise.
5- Do not follow the advice of friends unless they are making profits
Just as it is wrong to follow the advice of someone who is unhappy in their life, it is wrong to follow the advice of friends who suffer losses in the stock market, and to follow the advice of only those who are doing well and making money.
6- Invest your money in the field you understand
Many investors buy shares in companies that operate in areas that they do not understand, and this is a big mistake that many make, and it is better for the investor to put his money in the field he understands. Understanding the industry and its trends is a great advantage for any investor.
7- Use effective strategies and avoid ineffective ones
Regardless of the field in which the investor puts his money, he must increase his reliance on strategies that have proven effective, and reduce his dependence on those that have not been successful.
If, for example, an investor is making profits from mining stocks, but is making losses on the other side in insurance stocks or some kind of fund, then he has to re-adjust his strategies, and put his money into profitable stocks.
8- Avoid buying stocks that everyone else is buying
When everyone rushes towards certain stocks, the investor should be afraid to put his money in these stocks, because they are usually overvalued, as happened in the dotcom bubble.
9- Be honest with yourself
Perhaps investing in the stock market may not be suitable for all people, so it is important for a person to be honest with himself.
If a person is actually investing his money, he must invest the money surplus to his needs, in order to ensure that he will be able to pay all his expenses, in the event that stock prices fall.
10- There is no magic option for investment
Investors often switch from one option to another quickly, and if they find that one option does not make profits, they quickly move to another option, but in the end they find themselves not making profits from any option.
There is really no one magical investment option that will bring profits, and what suits one person may not suit another, and making profits in the stock market depends largely on long-term investment.
Source: The Balance