5 Stock trading tips for beginners in Australia
In the 21st century, the two most effective ways to preserve or increase the value of your money are to invest it in the real estate or stock market. However, real estate is a game of big players while the stock market is the place for average Australians who possess a little extra cash and want to have some good returns on it in the longterm. If you trade your shares daily, you may gain huge profits in the short term but you can also lose your money easily just like gambling. Therefore, experts suggest long-term investments. Here are 5 tips to guarantee your success in the stock market:
1. The stock market is extremely volatile
First things first, prepare your budget carefully covering all your expenses and debts. Only then, you should think about investing in the stock market because you don’t want to lose something that you can’t afford to lose. The stock market is extremely volatile and you can end up broke.
2. Do proper research before investing
Doing your own research is extremely important if you want to succeed and earn a profit on your investments. Track the progress of companies that interests you. Analyze their Form 10-K and 10-Q (company’s annual and quarterly progress reports), their leadership, and how they are managing revenue and expenses.
3. Set up your account to invest
You can open a brokerage account with a brokerage firm and buy and sell shares on your own. The four major Australian brokerage firms are Commonwealth Bank Australia, National Australia Bank, Westpac, and ANZ bank. However, it’s risky for a beginner to do trading on his own. Therefore, inexperienced investors avail a stockbroker in which there are two categories: Full-Service Brokers (they build a personal relationship with the investor and analyze his/her financial situation and provide assistance according to that data. They are expensive but their services are often worth it) and Online/Discount-Brokers (they don’t have any direct relation with the investor and only take orders over the phone or online and do not provide any assistance or investment advice like the former. They often charge per transaction).
4. “Never put all your eggs in one basket”
The above classic adage is the key to success in the stock market. Experts suggest investing in about 10 companies after due diligence. Although, you may be tempted to buy penny stocks or a lot of shares from 2-3 companies and trade on it daily but you have to be rational, patient, and resilient while playing in the stock market. The graph will go up and down but you don’t have to take action every time and if you do, it will incur further brokerage fees and taxes.
5. Take the profit or re-invest to maximize profit
When you buy shares and their prices rise, you can sell them and earn a profit. You can also take the original investment and leave the profit as an investment. Furthermore, the companies pay dividends to their shareholders twice a year. You can take it or re-invest it and multiply your share in the company to maximize your profit.
In short, the stock market is risky but profitable. You don’t have to monitor every minor and major fluctuation in the market and worry about your stocks. Treat it as a long-term investment instead of a shortcut to a big fortune like gambling. Proper research, an expert broker, diversification of your shares, and a long-term strategy will guarantee your success in the ASX.