Posted by It has always been common to accumulate considerable wealth with small amounts of money through stocks and funds. Such an attractive investment market has attracted many people. Investment for beginners, how can you successfully enter the investment field?
Investment For Beginners
This article will explain the three important concepts you should understand before preparing to invest. It will introduce you to common financial tools and terms. Clarification of myths to help you master the correct investment mentality and get one step closer to your ideal financial planning.
How should a beginner invest?
Master the three important concepts of financial management
Before entering the investment market. It is recommended that you first master the following three important concepts of financial management so that you can avoid unnecessary mistakes on the road of investment.
Financial management concept 1: Clarify your investment purpose
Before making any investment, it is recommended to clarify your investment purpose before choosing the right target. For example, some new investors who have just entered society want to gradually accumulate wealth through investment tools and take “stable profits” as their main goal. Then, stable funds and bonds with “lower risk” as product features may be more suitable, and if investors who already have certain assets and want to pursue “maximum profit” through financial products, they can choose stocks, futures, and other types with higher risk levels as financial management tools according to their financial situation.
Financial management concept 2: Plan the Proportion of Funds.
Investment and financial management can be divided into two parts: “increasing income” and “reducing expenditure.” Both are very important and should be given equal attention. Therefore, before investing, it is recommended to allocate the funds on hand first. Follow the “631 rule” or “541 rule” to allocate the cash flow in your body according to daily expenses, investment, and financial management. And risk management in a ratio of 6:3:1 (or 5:4:1). Understand that it does not affect the original life. Use idle funds to purchase other financial products. This is a more ideal investment situation.
Financial management concept 3
Know how to diversify risks
“Don’t put all your eggs in one basket” has been an unchanging principle since ancient times. As an investor, you must know how to diversify risks to reduce losses caused by fluctuations in the financial market or the impact of international situations. Therefore, many investors will adopt a diversified allocation approach, investing in conservative bond funds and active stocks at the same time to achieve a balance between gains and losses, or by entering the market in batches to spread the average cost of investment and reduce the fluctuation range of investment assets.
After understanding the basic concepts you should have before investing, we will take you to further understand the more common investment tools in the market stocks. And help you learn related knowledge.
How to play stocks?
First, learn the stock market terms and knowledge that novices need to know
When it comes to investment, most people would like to start by buying “stocks.” The following are common professional terms and knowledge in the stock market for your reference before entering the market for investment:
1. Odd lot
Means “less than one share.” One share is based on 1,000 shares. If the stock purchased is less than 1,000 shares, it is called an odd lot. For example, if a certain stock is 10 dollars, the actual cost of buying one share is 10,000 yuan (1,000 shares x 10 dollars). This is a high investment threshold for some people, so many people will buy 3 dollar or 5 dollar stocks based on their financial situation. These stock transactions of less than 10 dollars are common odd lot transactions.
2. K-line
K-line can also be called K-bar, candlestick line, and Yin-Yang candle. It is a line segment that records price increases. Through the K-line chart, investors can see the opening price, closing price, highest price, and lowest price after one day of stock trading to understand the fluctuation range of stocks. When the closing price is higher than the opening price, it means that the stock is rising and a red K-line will appear. If the closing price is lower than the opening price, it means that the stock is falling, and a green K-line will appear. It should be noted that regardless of whether the opening and closing prices are high or low, the top of the K-line is the highest price, and the bottom is the lowest price.
3. The market
The market refers to the “US Weighted Stock Price Index.” Through the market, we can understand the overall performance of the US stock market. If the market rises, it means that the US stock market as a whole has risen, and vice versa. The value of the market is calculated through the index. According to the weighted ratio, it can be divided into market value-weighted, “the higher the market value, the higher the weight of the market,” and stock price-weighted, “the higher the stock price, the higher the weight of the market.”
4. Ex-rights and dividends
Refer to the “dividends” obtained from investing in stocks. When an investor holds a stock of a company, he is a shareholder of the company. When the company makes money, it will return part of the profits to the investors. The distribution in the form of stocks is called “ex-rights.” And the distribution in the form of cash is called “ex dividends.”
5. Delivery
That means when investors buy stocks, they must remit the required amount to the bank delivery account before 9 am on the second trading day. After the stock transaction date to complete the transaction procedure. For example, if an investor purchases stocks on the 10th, the payable funds should be deposited into the deduction account before the 12th at the latest. If the deduction fails after buying stocks. It will cause “default delivery,” which may violate civil and criminal liabilities, and the consequences are quite serious. Therefore, novice investors must pay attention and ensure that the balance of the deduction account used to purchase stocks is sufficient to avoid accidentally breaking the law.
6. Day trading
Day trading is “same-day offsetting stocks,” which means buying and selling the same number of stocks on the same day so that the two transactions can offset each other without going through the original delivery process. Thereby earning the price difference. However, although day trading has high rewards, it also comes with high risks and requires certain conditions and rules. It is usually more suitable for those with certain investment experience.
7. Stock trading hours
Generally on weekdays (Monday to Friday), the entrustment time is 08:30 to 13:30, and the transaction time is 09:00 to 13:30. If it is after-hours odd-lot trading, the time is 13:40 to 14:30.
Common myths about investing in stocks
The following are two common myths that many investors often have when buying stocks, for your reference:
1. Playing stocks only looks at the rate of return
When many investors first enter the investment market, they only focus on the rate of return on stocks, inadvertently ignoring the high risks that come with high returns. And fail to make accurate financial planning or corresponding hedging methods. Therefore, as an investment novice, it is still recommended to do a good job of “risk diversification.”
2. Blindly follow market fluctuations
When some investors first enter the stock market, they will follow the bullish targets in the market to invest. However, in addition to paying attention to market fluctuations, investors should also do enough homework in advance to understand the company’s composition. Industry type, size, etc., of the investment target to more accurately grasp the stock market situation.
How do you choose an investment method that suits you?
Three major tips for you to know
Investment for Beginners: How can you continue to improve yourself?
1. Youtube videos
Nowadays, many YouTube videos specifically explain financial information. For investment novices, the content presented in the form of audio and video can lower the threshold for initial exposure to professional new knowledge, and users can also subscribe to suitable Youtubers according to their style and needs.
2. Read books and find teachers to learn.
Many financial books on the market are suitable for novices. Who wants to understand investment targets and tools? In addition, some people will seek the help of professional teachers to motivate themselves to continue to improve their knowledge of the stock market. However, it is recommended to pay special attention to the credibility of teachers and avoid listening to unknown news, which is more secure for them.
3. Pay attention to the blogs of professional banks.
If you don’t know where to learn about investment concepts and are afraid that the source of online information is unknown, subscribing to the blogs of professional banks is a very suitable approach for investment novices. In addition to absorbing new knowledge, you can also master the process or details of investment. So that the concepts learned can be applied to practical investment methods, and the effect of learning and applying is more significant.