It’s amazing. We work hard to better ourselves and to generate some money in our bank, and then we try to make that cash work for us in a high-interest savings account. Except, well, they don’t exist anymore.
Previous generations have benefited from squirreling their savings away with financial institutions offering 2% interest or more, and yet today – exacerbated by the pandemic – we’re lucky to get even a tenth of that.
You can understand then why many people are seeking an alternative investment vehicle for their hard-earned money, and maybe it’s time more of us started to investigate the stock market in greater depth.
You probably have an image of Wall Street traders throwing bank notes around on the deck of a super yacht, but in reality, stock trading is nothing like that for people investing their own cash.
Instead, your object is to try and achieve that 2% or more gain on your invested cash – that way, you’re outperforming any typical savings account you might have at a bank.
And the good news is that it might not be as difficult as you think.
Top tips for stock market success
Cast aside images of Leonardo Di Caprio in the Wolf of Wall Street, and instead get your head around concepts like marginal gains and compounding.
Anyone, and we mean anyone, can enjoy a 2%+ annual yield on their investments into the stock market. But you will need to follow some crucial steps:
The good place
If you were going to buy a new car or TV, the chances are you would have a particular vendor in mind prior to parting with your cash.
And the same should be true with investing in the stock market. You will need a broker via which you open and close your positions in the market, and – isn’t this always the way? – not all trading brokers are created equally.
It pays to do your research then, so always read reviews and do your homework before signing up for a brokerage account – you could read an FXTM trading review to get you started.
Time is on your side
For newcomers to stock trading, one aspiration is that you are going to find that ‘golden goose’ stock that makes you an overnight millionaire – think Zoom at the start of the COVID-19 pandemic.
In reality, trading doesn’t really work that way, and you should consider exactly what stock investing is.
Ultimately, when you buy shares in a company – no matter how few – you are an investor in that business’ future. So, you wouldn’t invest in a firm that had no future, would you?
Taking a shot at a few penny stocks, hoping that they enjoy an almighty bull run, is not a strategy for long-term success. Instead, look for established companies who you believe that the market is undervaluing, or at least those that should enjoy those marginal gains – remember the 2% – in the year(s) to come.
Keep your emotions in check
Wouldn’t it be nice if we all had the Midas touch in the stock market?
Just imagine if every stock you invested in yielded a tremendous profit – that would be the dream.
But in trading, as in life, we have to kiss a few frogs before we find our prince/princess, and that is why we have to accept that some trades will not go as planned. Taking a small loss – rather than hoping for the best when a ticker turns red – is a key weapon in any trader’s arsenal.
One of the factors that prevents many from being successful in the stock market is a lack of discipline, and the truth is that emotional individuals tend to fare the worst when investing.
Try to be Zen-like and calm at all times and accept that not every trade you make will be a success. Utilize tools like Stop Loss and Take Profit to ensure that the numbers stack up on your investments, and that long term, you have a ‘positive expectancy’ of achieving that 2%.
Find a strategy that works for you
There are many ‘casual’ investors who simply buy as many shares as they can afford, sit back and watch (hopefully) as the money rolls in.
That doesn’t suit everyone, however, and if you do have a bit more time on your hands, you can be a bit more forceful in your trading.
Scalping, day trading and swing trading are strategies you can deploy that look to benefit from market volatility, locking in a number of small, consistent profits along the way.
Success in volatility-based trading requires patience and steely discipline, however, and so, as ever, we recommend you open a demo account prior to risking your capital.
But, as we have outlined in this article, success in the stock market is very much there for the taking.