Since about 2015, Wall Street has been enjoying some of its more profitable years in history. From January 2016 until February 2018, the Dow Jones Industrial Average, the most closely watched stock market benchmark index, climbed from 16,466 points to a record high 26,499 points. It was only until United States President Donald Trump launched a global trade war that Wall Street started paring back some of these historical gains.
Investors who have learned to master the stock market have likely been enjoying handsome profits in recent years. However, only those who have been diligent in terms of investment strategies can claim to have been successful. Mastering the stock market requires constant learning, strategic thinking, and discipline. Jan Gleisner, a trusted San Diego investment advisor, recommends following a few key principles of investing in the stock market.
Seek Advice from Stock Market Professionals
Quite a few mutual funds have performed better than Wall Street in recent years, and this is because they are managed by seasoned professionals who have already learned to master the stock market. For many investors, letting professionals manage their money is the best way to approach the stock market, particularly when they do not have too much time to learn.
Understand Risk Tolerance
In general, stock investors must be prepared to lose everything they put into the market, which means never investing what they cannot afford to lose. Investment funds should be treated as disposable income. In other words, stock traders should never put their savings or cash reserves at risk. For example, if you plan on getting started with $1,000, your personal life or household should not be affected in case you lose the initial investment in just a couple of unfavorable trades.
Practice Good Money Management Techniques
Just because you can afford to lose $1,000 doesn’t mean you should enter the market with this goal in mind. Money management is the art of keeping your losses to a minimum. The most common technique in this regard is to learn how to handle stop-loss features. Every market position you take should limit how much you can lose. Let’s say you’re interested in buying 100 shares of Microsoft on June 27th, 2018. Since you know Microsoft closed at $97.54 on that day and lost 1.55 percent on a single trading session, your lowest stop loss should be placed at about $95. Reasonable money management will tell you it’s better to cut your losses at about $150 than to lose even more money on a single market position.
Adopt a Life of Constant Learning
Billionaire investor Warren Buffett is known to dedicate 80 percent of his day to reading and learning, and he always feels he needs to learn more. One of the best pieces of advice Buffett gives to beginner investors is to not go to bed until they have become a little smarter that day.
Investing in the stock market is just one of the many reasons to meet with a financial advisor. Jan Gleisner can offer you invaluable tips on making business investments and managing your personal finances as well. Call 858-337-2385 to schedule an appointment.