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Share Market Tips: The Ultimate Beginners Guide You Should Have Been Given at Birth!

There’s no doubt about it that stock investing is a key part of wealth building. Oftentimes, I’m asked by early-stage investors: “How do I go about investing in the stock market?” Oftentimes, I blithely respond “Don’t, you’re not ready yet”. I say this for impact. I want people to take note and avoid getting roasted by the stock market. I want people to ask themselves the real question behind the question, that is: “Am I ready to invest in the stock market?” Puzzled!? Let me explain. If you’re a stock market beginner, listen up!

Pyramid Investing – What Shape is Your Pyramid?

No, I’m not talking about buying shares in heavily-eroded ancient Egyptian pyramids! A sound investing framework is regularly depicted as a pyramid – investing first in a secure base of cash and cash equivalents (Money Market Funds, Certificates of Deposit etc) then moving up the pyramid into bonds (government and corporate) before you start investing in large-cap stocks and so on.

Most novice investors I know get involved in share market investing too early without having earned the right to risk. They haven’t built a sufficient, secure base to their investment pyramid first and leap-frog their way to the top of the pyramid in pursuit of high returns. Indeed, some make the same mistake by leap-frogging into real estate investment too soon also. Their lack of experience and financial intelligence means they expect to make quick and large returns, but oftentimes instead end up losing a lot of their hard-earned capital. As budding sophisticated investors, we want to avoid these pitfalls. I believe in earning your right to risk. Read on to see what I mean by this.

Earn Your Right to Invest/Risk

Here’s my take on becoming wealthy through share market investing. First of all, if you haven’t saved at least 6-12 months of living expenditure you are not yet ready. Since we are interested in wealth building and learning how to become rich for life (and not just temporarily) then we want to follow a process that enables us to become wealthy and stay wealthy. After you’ve put away 6-12 months in expenditure, you’re now in a position to invest in the base of your pyramid i.e. cash and cash equivalents. After that you can move up the pyramid into the domain of government and corporate bonds etc. Only then have you earned your right to risk. Only then do you have a secure enough financial footing and intelligence to now be in a position to invest in the share market safely.

Investing isn’t a hobby and shouldn’t be treated as one. Hobbyist, novice investors get toasted. They invest too much of their capital, too soon. If their shares soar quickly, they get emotional and greedy and invest more capital with no sound investment basis. They might get lucky once or twice and make large gains but more often than not the opposite occurs. If their stocks plummet they get emotional and fearful and sell up everything… at a loss.

Beware the Dinner-Party Investment “Tip”

Dinner parties and pub talk are great ways for socialising but not so hot when it comes to investment strategies. In fact, you could do worse than take a contrarian view and sell when everyone’s talking about buying and vice-versa. Rather than thinking short term and chasing after the next big share rise tipped at dinner-party tables, I believe it’s better to behave like a long-term investor. For me, this means owning low-cost index mutual funds or exchange-traded funds (ETFs) in the most tax-sheltered manner i.e., using pre-tax money in retirement accounts like 401ks, IRAs etc

It should be pointed out that I don’t think buying individual shares is the central pillar of any smart wealth building strategy. Unless you’ve got oodles of time on your hands and a real penchant for technical analysis I suggest avoiding spending the remainder of your shares investing days, hand-picking individual shares.

If you really must, and you’ve already built up sufficient security elsewhere in your investment portfolio (as per the investment pyramid framework mentioned above), it’s OK to play with a very small amount of capital (e.g. less than 10%) on buying stocks directly so long as you’re thinking long-term and intend holding onto these stocks for years or possibly even decades!

Know Your Fundamentals

There are numerous share market investing trading strategies – scalping, momentum trading, technical trading, fundamental trading, swing trading etc. If you’re a beginner at share market investing than I think the best trading strategies is fundamental analysis. After all, one of the world’s best know and wealthiest investors, Warren Buffet, undertakes fundamental analysis of the shares and securities he buys.

Fundamental analysis requires that you understand the key business financial indicators such as Cash-flow, Earnings and Balance Sheet positions as well as some of the main financial ratios used to value stocks e.g. P/E Ratio, Return on Equity, Earnings Growth Rate, Debt to Equity ratio, Dividend Yield etc. Developing your fundamental analysis skills will stand you in good stead in both the investment and business world.

Where to Trade – Should You Have a Stockbroker?

With the advent of online trading anyone can be up trading within 24-48hrs of reading the latest edition of “The Idiots Guide to Stock Investing”! However, from my experience online trading platforms are littered with financial casualties. Novice investors get torn to shreds not by the online platforms but by their own lack of knowledge, technical unfamiliarity, and the emotions of greed and fear.

Momentum trading through online platforms (e.g. OptionsExpress,, eTrade, SaxoWebTraderetc) requires you to develop Technical Analysis skills and have in-depth knowledge of technical indicators (e.g. Moving Average Convergence/Divergence (MACD), the Rate-of-Change (ROC) indicator, the Relative Strength Index (RSI), Bollinger Bands,Stochastics etc) and identify chart patterns (e.g. Head and Shoulders, Cup and Handle, Triangles, Breakouts etc).

If you do want to jump onto some online trading platform and begin stock trading then it can be a really good idea to begin share trading with a virtual/simulated account. That way you make your mistakes using phantom money.

Even though I’m somewhat sceptical of the average stock-broking firms’ modus operandi, it can be a good starting point for budding investors. Treat the whole experience as an exercise in sleeping with the enemy! Sure, you’ll pay higher trading commissions than you would through an online trading platform and you may or may not make some gains. However, that said, you should at least avoid getting skinned alive and you’ll gain some valuable insights and knowledge from the process.

In Summary:

Remember the words of legendary businessman Donald Trump, “sometimes your best investments are the ones you don’t make”. When it comes to share market investing this saying could be more apt! I highly recommend beginning share market investing when you are ready i.e. after you have earned the right to risk. If you’re interested in learning more about this wealth building concept then check out my website and other articles.

Many beginner guides to share market investing focus on: understanding risk, valuation methodologies, share market indices etc. I think there’s enough info on this already out there so what I wanted to do was offer some structure and some strategic thinking behind your share market investing beginnings. I hope you found the article worthwhile. Thanks for taking the time to read this. If you like what you’ve read and think this could be useful to someone else, please share…share the knowledge, share the wealth!

6 Tips on The Stock Market – How It Began and Ways to Succeed

If you are thinking of stock market investment and want to become a successful trader, you need to have a clear conception of market and its functioning. Apart from that you need to prepare yourself for stock trading. Here we are offering some tips on starting stock trading and ways to succeed at market.

1. Choose a broker – For starting with stock market trading the first thing that you need is the stock broker. A stock broker is a person who will execute your trades at the stock market. Whether you choose to trade online or offline, a broker is indispensable and you can not trade in stocks without a broker. While choosing your broker, select a competent, reputed and qualified broker to ensure hassle free stock trading.

2. Get prepared for trading – This is the age of online trading and most of the traders are opting to trade online as there are so many benefits of online stock trading over conventional way of offline trading. Availability of real time quotes, real time trades and lower brokerage rates are some of the advantages of online trading. To get prepared for online trading you need to get trained to use the software that will be provided by your broker for online trading. The training of the software will prepare you to place buying and selling orders, and do other things like transferring funds, checking trading history and payout of funds and so on.

3. Learn to read the market – To become successful stock trader you need to learn how to read the market moves. If you can read the signs of market movements you can predict the future of the stocks flawlessly which is key for success at stock market.

4. Start with paper trading – Before you start trading at the market, you should start with paper trading. Paper trading is nothing but trading without actually investing money. You can speculate and choose to invest in certain stock, once you have chosen, wait and watch how the features at the stock market. If it moves they way you speculated, you know you are going the right way and if your speculations go wrong, you know you have to work more on your speculations skills. Once you have gained confidence in trading, you can actually start investing in the stocks.

5. Go slow in the beginning – Besides, when you first start to invest, concentrate on one or two stocks and trade in them. It will let you spend more time to watch these stocks and trade with confidence. Gradually as you get more experienced and learn the tricks of the trade you can trade in other stocks and diversify your portfolio. This way you can avoid suffering loss in the beginning that would spoil your future as trader.

6. Selecting stocks for trading – Selecting the right for investment is the most important aspect of stock trading. If you can choose the stocks that will appreciate in the future, you can make good profit at market consistently. So try to learn the techniques of fundamental and technical analysis take the right trading decisions at the right moment.

These are some tips that will effectively help you to start as a stock trader. But when trading in stocks you must always remember that all the trades that you do can not earn you profit. Stock market is dependent on so many factors that control the price of the stocks and hence it is most likely that you will face loss at some of the trades that you do. But the key for success at stock market is to overcome the losses with the profitable trades.

Things You Need to Know If You’re New in the Stock Market Trade

Figuring out how to start out in the start market trade has always been the tricky part. So many self-help articles have been written and published online but they just don’t seem to have a clear-cut solution to properly get things started and get the ball rolling. Here are a few stock market tips you can use. Suffice to say, the first thing to understand and consider is that the stock market is cut throat competition and is considered as a legitimate business by giant corporations. It would be wise to do the same.

The next thing that you should do is to get yourself fairly efficient investment management software. Modern technology is actually on your side with this one. After all, nowadays, good and fast internet connection and investment software barely costs anything. And of course, good money management comes absolutely for free because it’s something intrinsic in you as a business person. There’s no point in exerting so much effort and time in trying to figure things out when solutions are already there for the taking.

You should look into purchasing or acquiring two types of software. The first one should be software that caters to personal money management. You can use this to calculate for your profits and loss. It can also keep track of the cost of subscriptions for you along with the cost of brokers and whatnot. The second software, on the other hand, should be used to track fund and stock prices along with technical news and all the other analyses you need to perform to ensure your business goes well.

You should also always ensure that you are educated. Get yourself acquainted with basic accountancy principles, stock market history, and annual reports. That and learning about money management should get you started. And remember, practice always makes perfect. Those are just a few stock market tips you should keep in mind as a beginner.