First Person: Five Solid Rules for New Investors

Yahoo Contributor Network

Every investor has to start somewhere. From an early age, I have always had an interest in the Stock Exchange and as an adult I follow the rise and fall of the NYSE and Nasdaq very closely. There are some key rules that all novice investors should follow in order to get the best return upon their investment. Here is a look at five key rules every beginner investor should heed.

Follow the Market Trends

Prior to sinking any money in the stock market, you must first monitor the market. Determining whether it is a good time to invest, is just as important as knowing which stocks to invest in. By following the market trends, beginner investors can test the waters of the stock market, without incurring financial risk or loss. A good way to follow the market is to read the business section of newspapers, perform search engine queries on stock market trends, or identify five stocks that you have interest in, and see how they perform over the course of 30 days. This should give you a long enough window to monitor highs and lows from day to day.

Start Off With Low Risk Investments

Another good rule that new investors should following closely is to start off with low risk investments. While many investors will tell you "Go big, or go home," this simply is not good advice for novice investors. In order to protect your money, invest wisely in low risk investments; stocks with low prices that are poised for growth.

Don't Be Afraid to Take Risks

With that being said, once you've become acclimated to the world of investing, don't be afraid to take some risks. Prior to doing so, monitor the stock's history, and determine if the stock appears to be undergoing a period of growth, and if the stock has had a stable past.

Know When To Withdraw Your Money From a Stock

Another important part of investing is knowing when to withdraw your money. If a stock is not growing, and money in not being made, or if you are losing money on it, it may be time to take your money out. Knowing when to pull out is just as important as knowing when to invest, if not more so.

Look for Stocks With Steady Growth

A good investment rule is to look for stocks with a steady rate of growth. Stocks on the rise will likely be a good return on investment, as long the stock continues to grow.

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

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