If you’re new to the world of trading stock the entire process can seem complex, and possibly even scary. Because of this, guidance and proper advice will be your new best friend. While we obviously can’t come up with an entire investment strategy for you since we don’t know your personal situation, we can provide some tips as to what you’ll need to think about when you’re trading stock. Like the ones below for example:
Profit VS Loss
Profit vs loss is a fairly standard concept when it comes to trading stock. Unlike situations where you’re running the business yourself, managing your profit will mostly be out of your hands as you’re at the whims of both the company that you have chosen to invest in as well as the market overall. Because of this, you’ll mainly be assessing projected profits or losses based on a single spreadsheet that shows how much prices have risen (or fallen) over a certain period of time when trading stock. This simplifies things great but does require you to be okay with no longer being in control of your funds.
The next thing you’ll need to consider when trading stock is how much impact the transaction fees of your chosen platform will have on your portfolio. In most cases, you’ll pay this fee both when you buy and when you sell so if you’re doing this regularly, transaction fees have the potential to seriously eat into your profits. Because of this, they should be considered carefully both when selecting a platform (I.e. are you better off with an exchange that charges a fixed fee or a percentage) and when you’re actively trading stock.
Another thing to consider when trading stock is dividend cycles. For example, if you’re getting into a new share and looking to benefit from the dividends that that company pays, you’ll want to get in before the cut off date. By the same token, you’ll want to hold off on trading stock until after dividends for the most recent cycle have been paid out if you’re in a position to do so. This obviously doesn’t apply if you need the funds immediately or are rapidly switching your investments but is good advice in general.
Trading stock can have significant implications on your taxes so it’s important to be aware of how this will affect things before beginning your investment journey. For example, if you earn enough, you may get bumped up a tax bracket, by the same token, however, significant enough losses could see your taxable income drastically reduced. Because of this, it’s important to have at least a basic understanding of the tax ramifications of trading stock and always use a registered accountant if you have any doubt.
Finally, keeping on top of market trends is vital if you wish to grow and protect your investment. While some shares are indexed and therefore remain more stable, others are likely to fluctuate wildly in tune with market conditions. This is great for those looking to get into the market – buy when there’s blood in the water as they say – but it can spark fear and unnecessary losses due to panic selling with newer investors. As a general rule, if you have the ability to do so, you’re going to want to ride out any dips in the market (and increase your portfolio during this time if you have the funds) however, you should always focus on your personal situation and seek professional guidance and advice if you feel it is needed.
Now you know more about trading stock it’s time to get started, good luck!