Anybody can make good money through stock investment regardless of their educational background, IQ, occupation, income, or assets. Over long periods of time, based on historic performance, you can expect to earn an average of 9 to 10 percent per year total return by investing in stocks. Hence, in order to maximize your return, here are some tips to follow:
Don’t try to time the markets
Anticipating where the stock market and specific stocks are heading is next to impossible, especially over the short term. Economic factors, which are influenced by thousands of elements, as well as human emotions, determine stock market prices. Be a regular buyer of stocks using your savings. Buy more stocks when they’re on sale and market pessimism is running high.
Diversify
Invest in the stocks of different-size companies in varying industries around the world. When you assess the performance of your investments, look at your whole portfolio at least once a year, and calculate your total return after expenses and trading fees.
Keep trading costs, management fees, and commissions to a minimum
These represent a big drain on your returns. If you invest through an individual broker or “financial advisor” who earns a living on commissions, odds are high that you’re paying far more than you need to be and you’re likely receiving biased advice.
Pay attention to taxes
Like commissions and fees, federal and state taxes are a major investment “expense” that you can minimize. Contribute most of your money to your tax-advantaged retirement accounts. You can invest your money outside of retirement accounts, but keep an eye on taxes. Calculate your annual returns on an after-tax basis.
Don’t overestimate your ability to pick the big winning stocks
If you’re extremely confident that you can pick a big winning stock, go buy the lottery while you’re at it. Why not rely on someone who has more knowledge and experience? One of the best ways to invest in stocks is through mutual funds, where you can obtain the services of an experienced, full-time money manager at a low cost to perform all the investing grunt work for you.
