By Abubakar Sadiq Ilyasu
Because the stock market is open to all and sundry and can easily be accessed remotely, it is a great opportunity to effortlessly increase your income stream. While some people fully dedicate themselves to investing in the stock market, others only invest sparsely or recreationally. The stock market is also great for companies in need of capital to fund their activities.
Trading in the stock market has yielded different results for investors, ranging from massive profits numbering in billions to more modest gains and even severe losses. For the beginner, these varying outcomes tend to make you hesitant to invest in a venture shrouded in so much uncertainty. Sometimes, people jump into the stock market fueled by misconceptions and quickly realize that the reality is not what they expected and so they cut their losses and give up. But in order to achieve any success in the stock market, there are a few things you must come to terms with:
You Will Lose Money
If you are so risk-averse that the prospect of losing the least amount of money sends shivers down your spine and gives you sleepless nights, then the stock market is not for you. The stock market is wildly volatile and inconsistent because it is influenced by a lot of internal and external factors that are more often than not, out of your control. The inevitability of losses is a reality every veteran trader dreads but accepts, regardless of how astute they are. As the stock market follows the business cycle, you are exposed to a lot of systematic risks, especially during periods of economic downturns. But while losses are inevitable, it is up to you do everything you possibly can to minimize their impact through hedging, diversification of your portfolio, and other mechanisms of risk minimization. As a beginner, understanding this will go a long way in ensuring you don’t get discouraged about the long-term profitability of the stock market, especially if these losses occur in your early days as an investor.
It Will Take Some Time
Many people believe that the stock market is a place for easy money and are often disappointed to find that this is not the case. While this holds true for some people, most people are not as fortunate. Most investors take a while to adapt to the capriciousness of the market and to figure out which types of investments work best for them. If you’re using a broker or fund, it takes a while to figure out which one maximizes your profit or if you even need them at all. Likewise, most investments take some time before they yield profits. This is because huge profits stem from capital gain; the result of your stock becoming more valuable, and this usually takes a while.
You Have to Understand the Terminology
Do you know the difference between common stocks and preferred stocks? What about the difference between a bullish and a bearish market? Whether you are investing by yourself or using a broker or fund, it is important to understand the technical terms used in the stock market which are confusing and often misinterpreted. This will enable you to understand the goings-on of the market better and to make better decisions and increase your profits.
Investing in the stock market can be a very profitable venture if approached the right way. But as an investor, you must never have the mindset that making money in this market is going to be easy. Stock trading like most other ventures, requires commitment and hard work and you must be resolute in applying these principles.
Abubakar Sadiq Ilyasu, 08055668874.
