Top 3 Things To Consider When Investing In The Stock Market

risk-tolerance


Stock market can be the most rewarding and profitable business of all. However, without proper mindset this could also be the worst investment. So before you start, it is a must to know the things to consider before you invest.

Before you start on this investment, it is vital to have these 3 things considered if this satisfies your needs.There are a lot of investments out there. The worst thing that could happen is having an investment for a wrong reason.

Self-assessment is vital in every business decision. Knowing your purpose is the ultimate step before anything else. Read the Introduction to Stock Market.


Risk Tolerance

Would I be scared if my equity loses value? What if my Php 50,000 investment would be worth Php 30,000 after few months?Investing is not about always winning. Playing safe either is not a panacea. In fact it could be the riskiest decision. Price fluctuation is normal and you could mitigate risks in the stock market.

Market price fluctuates due to activity of buying and selling of shares in stocks exchange. If more investors are buying a specific stock, the price tends to go up. If a certain stock is oversold, the price goes down. This follows the law of supply and demand.



There are countless factors that affect stock prices. It could be that a public company is more active than its competitors, say expansion, thus more investors want to earn a share of the business.

It is therefore important to assess ourselves and answer these questions.
1. How much am I willing to lose?
2. Will I be strong enough to accept losses?

If you are confident with your answers then you may proceed to the next step.


Investment Needs

Unlike any other investments, stock market is intended to be a long-term investment, say 10 years or more.

In investing, periodic buying of shares is vital to achieve financial growth. Setting aside a portion of your monthly income to invest in stock market is very important as this is one of the ways to achieve cost averaging.



Stock market is not for people who want to earn immediate income in 2 years or less. While you can expect value appreciation, optimal profit couldn't be achieved. This is because companies tend to grow every after 3 years, on average.

Although there are other ways to earn in the stock market like trading or “short-selling”, this is too risky and you could lose all your money.

Guide questions:
1. Am I planning to have a sufficient money in 10 years that banks cannot offer?
2. Do I want to have a significant increase of my investment for long-term?

If your answers are yes, you may proceed to the next step.


Other Priorities

You could have other commitments and still invest in the stock market. I could attest to this. Whether you are employed or a business owner, you should really consider investing in stocks.

My main income is active income. Since my energy and time is focused on my job, it is hard for me to have my own business. That is why I consider investing in the stock market.



What I usually do is I invest every month and watch my money grow. Using automated online transfer, I schedule my monthly investment every month so I don't need to do it manually. This saves me time and spares me from the pain of seeing money invested in stock market.

Guide questions to ask yourself:
1. Am I so busy with something I couldn't leave yet I still want to have an investment?
2. Do I want to have a residual income aside from my active income?

If your answer to these questions are yes, then you are ready to invest in the stock market.


Conclusion

Investing in the stock market is easy. The real challenge is in the long haul. You might encounter a series of bear market and it could easily lose your mind. However, this shouldn't be a barrier on your investing journey. You just need to manage the risk.

What else did I miss? Let me know in the comments.

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