Investing in the stock market is the best way to make money in the modern era. Not everyone can start a business. So instead of taking all the risks, why not invest in stocks of the companies which are successful? But wait, investing in stock market isn’t easy. This article outlines the smartest and most effective ways to invest in a stock market. These sure shot advice points will help you get profits from stocks.
Diversified Portfolio is the Key
One of the best ways to invest in a stock market is to diversify your portfolio. If you are starting with $1000, I’d recommend dividing your investment capital into at least three parts based on the sectors. For example, healthcare sector has been an outperformer in the last 5 years. Therefore, you should allocate a major chunk to invest in a healthcare company whose stock is trading at cheap prices. In this example, I’d recommend UK-based Quotient limited, which is working on an innovative blood transfusion technology and experts believe that the stock will breakout later this year. Similarly, you can invest the remaining part of your investment in the tech sector.
Use Robo Advisors
Typically, average investors don’t want to pay heavy fees to advisors or stock analysts and prefer to do research on their own. Apart from doing thorough research and studies yourself, I’d recommend using Robo Advisors to analyze stocks. A Robo Advisor analyzes different stocks for you based on computer-based algorithms. If you are looking to use a Robo Advisor as a start, I recommend TAnalyzer.
Put in the Effort and Learn the Financial Terms
If you think that you can make money from the stock market without putting in effort, you are greatly mistaken. A smart investor will always delve into the nitty gritty details of stocks and go deep in the financial terms. If you can’t evaluate a company by yourself, that means you need to put in some hours to understand the market and company fundamentals. Never buy stocks based on the “herd mentality”.
Read the Best Books on How to Invest in the Stock Market Before Going All In
Reading books is the best way to learn how to invest in stocks markets. Once you get a strong grip on the principles of markets, you will be able to invest in any market without the initial fear. Some of the best books of investing in stocks include The Intelligent Investor (By Benjamin Graham), The Essays of Warren Buffett: Lessons for Corporate America, Value Investing: From Graham to Buffett and Beyond, and One Up On Wall Street: How to Use What You Already Know to Make Money in the Market. If you don’t like books, head over to Investopedia, which is the powerhouse of the investment world learning material.
Invest in ETFs
Exchange-traded funds (ETFs) are giving mutual funds a run for their money these days. Investing in ETFs is another smart way to invest in the stock market. ETFs allow you to make money from lucrative sectors. For example, we all know that AI and Robots are the future. Those who invest in AI and Robots will be rich in the future. But how can I invest in companies which are into AI and Robots as their shares are extremely expensive? You guessed it right; buy ETFs which track AI and Robotics companies. To kill the initial nervousness, go ahead and buy a few shares of Vanguard's S&P 500 ETF (VOO), which charges no commission. Buy the ETF, hold it, and watch how things play out!