Is Trading Stocks Hard?
Lots of people who are new to trading stocks wonder if it's hard. Well if you're a beginner yourself, the first thing you should learn about the stock market is that there's many different ways to trade stocks and no single way is the same as another. In other words, you may find one type of trading to be easier than another, depending on where your trading skills are strongest. For example, take a look at an investor that is skilled at choosing stocks that will pay off months or years later. This type of trader may find that particular type of trading to be easy when compared to day trading. Day trading is when you buy and sell stocks very frequently, such as every day, in an attempt to make a quick profit. It's pretty much the opposite of long term trading, which is what that investor does when he looks for stocks that will rise in value over a period of many months or years.
But if you want my personal opinion, I think that looking for long-term investments is much easier than short-term ones. I think it's pretty easy to find companies or stocks that are almost guaranteed to be doing better and better each year. Some brands are almost invincible, and it's almost a sure bet that they will rise in value in due time. But you'll notice that I used the word "almost" many times. This is because nothing on Wall Street is 100% guaranteed, 100% invincible, or 100% a sure bet. There will always be some types of risks involved in any trades you make. The key is to calculate which risks are worth it and which ones will ruin you. This is also why it's sometimes good to diversify your stock picks. By choosing to invest in many different companies, you can minimize your losses. But this only works well if you choose to diversify strictly with companies and stocks that you know have a very high chance of being successful based on their past history and current forecast or future outlook. If you diversify with some bad stock picks and some good ones, then the bad stock picks may cancel out any earnings you make from the good ones. If 100% of the stocks you've chosen have a good history and look to be strong stocks that have little risk, then even if one fails you will still have 90% good stocks that will help cancel out the loss from that one which failed and still allow you to see a decent profit over time.
If this is confusing to you, then it's understandable since you're most likely one of many beginners just getting started and you don't have much experience with trading stocks. So let's use real life examples of stocks that have good track records. If you look up stocks like Pepsi (Ticker Symbol: Pep), United Technologies Corporation (UTX), and Noble Corporation (NE), you will see that these three particular stocks seem to have a very good track record or history. They have all been around a long time and every year or every two years or so they seem to make money for their investors. In other words, they seem to be very good stock picks. So imagine you have $6,000 to invest. You could buy nothing but Pepsi's stock with your $6,000, and if Pepsi does really well, then you will make lots of money. But if Pepsi's stock suddenly does bad, then you could lose a lot of money. This is why many people diversify and will divide the $6,000 up into more than one stock. Someone who wants to play it safe may choose to divide the $6,000 up three ways, and invest $2,000 into Pepsi, $2,000 into United Technologies, and the remaining $2,000 into Noble Corporation. It would be unlikely for any of these three stocks to suddenly do bad, but if the rare situation happens that one of them does do bad, then the other two will help minimize the loss because the odds of the other two doing bad at the same time is not unlikely, except in the event of a market crash.
As far as market crashes, not all stocks do bad when the stock market crashes, though majority do. This is why some investors take their diversification to the next level and not only diversify in different stocks, but in different industries or sectors as well. If the market crashes and tech stocks are hit the hardest, then other sectors like housing or medical may not be hit quite as hard. So in this case, it would be foolish to invest in only stocks that are tech stocks. It would probably be smarter to divide your investments up into different industries so in case one industry is hit really hard, hopefully the other ones you chose won't suffer the same fate and you won't lose as much, if any at all. But just keep in mind that these are all just examples I'm using and this is in no way advice that you should take without using your own judgment and deciding for yourself what is best for you and your money. This is just my personal view on the situation and what I would personally do if I wanted to play it safe.
So if you try to trade stocks and you find it to be hard, then maybe it's because the type of trading you chose has lots of risks involved and you're seeing the consequences of that. Maybe it's because you haven't diversified enough or maybe it's because you didn't do your homework first before deciding which stocks to purchase. Remember to always study any investments you're interested in before actually putting your money into them. Don't just purchase a stock because you're familiar with the company or the brand name. Many people invest in Coca Cola, Apple, or Walmart because they are familiar with these brands and they know the companies are popular so they assume the stocks must be good choices to invest in. I'm not saying these are not good stocks, just using these three as examples of name brands that everybody is familiar with. Some name brands don't always do good when performing in the markets and some just don't grow too fast so their investors have to wait many years before even seeing a very small return profit from their investment. So all in all, how easy or how hard the stock market is depends on many factors but more importantly, it depends on you and what decisions you choose to make or what methods types of trading you choose to do.
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