Top 5 Things To Do Before You Buy A Stock

 

 

 

 

 

 

 

 

So, looking to invest in your first share?

 

Here are the top 5 things to do before you click that “buy” button.

 

1)      Choose a broker

Having a good broker is important for your investment. Transaction cost can be one of the highest costs for you as an investor. However, do not run to open an account with the lowest cost operator in your country. Other things to consider when choosing a broker include reliability, trade execution ability and financial strength. A good broker needs to provide prompt and responsive service to you when you need it, where you need it. This means that your personal broker needs to be dedicated to his/her job and the company’s trading platform need to be reliable across all devices.

 

2)      Have a strategy

Think about how you want to go about creating your portfolio. The idea of investing is to create a well-balanced portfolio that you will be comfortable to hold and sleep well at night. Think about how much you want to commit to your portfolio and how many companies you want to invest in. A typical number to aim for is having 30 companies in your portfolio. If you are not ready to spend the time and effort to research and build up the portfolio, maybe you should consider being a more passive investor by looking into index funds that just tracks the market return for you.

 

3)      Build a watchlist

Before you start buying any shares, it might be a better idea to build up your watchlist first. A watchlist is a list of companies where you have already research on them and is keeping a close watch on them. The idea is to get yourself familiar with the companies you are interested in first and so that you can give yourself more time to evaluate the merits of each opportunity before risking your capital.

 

4)      Be prepared to hold long term

Although the market tracks every price of every securities by the nano seconds, investing only works if you are prepared to hold your investment for the long term. By long term, I mean as least more than 5 years and if possible, forever. This is because a stock is not a piece of paper or an electronic ticker that should be traded and speculated on constantly. It represents a part ownership into a company of your choice. And we should view each stock as a real business and ourselves as real, long term partners of the company.

If you are just seeking for quick profit, then investing is NOT for you. If you are seeking excitement in the stock market, then investing is NOT for you. If you believed that you need to trade constantly, then investing is NOT for you.

 

5)      Never stop learning

Investing is a lifelong pursuit for knowledge. Be prepared to constantly upgrade yourself to gain new knowledge and new perspective. With them, you will see yourself grow as an investor and your bank account will grow together with your knowledge.

 

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All views and opinions articulated in the article were expressed in Stanley Lim’s personal capacity and does not in any way represent those of his employer and other related entities. Stanley Lim does not own any companies mentioned above.

 

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