With inflation rates finally going down after the shaky recovery from the effects Covid-19 had on the economy, people are beginning to look for new ways to spend their money. One of the major outlets that people are using their money on is the stock market. The phrase “Let your money work for you” has been thrown around frequently in the recent decade, it is also the same concept that has drawn people into investing. But with great opportunity comes even greater risks, people will often have the wrong impression of the stock market when they first start investing, they may buy a stock just because they heard about it or because it's been growing recently without doing any additional research, but this type of gung-ho outlook on the stock market can lead to people losing all of their money in only a couple of hours. The most crucial part of investing is doing research.
Investment research is rarely ever talked about since it isn’t necessarily the most exciting part about investing, which causes people to have unrealistic expectations about the stock market. Granted, there are stocks that you don’t have to research called Blue Chips. These are companies that are typically widely known and are leaders in their industries, such as Apple and Walmart. Blue Chips are considered safe stocks with little risk, but with small risk comes small reward so Blue Chips don’t grow very quickly making them the perfect investment if you just want to sit on your stocks over a couple of years and let them accumulate wealth, but if you want to try to make money quickly in the stock market, independent research is recommended. It may seem like a daunting task and many may not know where to start, but research mainly boils down to becoming aware of interesting companies and fact checking them through research and source comparison. Finding companies to invest in is important and can be pretty tricky, since people aren’t just looking for companies that everyone knows about, but instead lesser-known companies that could grow quickly. The best way to find companies is to keep up-to-date on the news as well as look for any innovations or research happening in industries, like the creation of new improved batteries for electric cars. After finding a car that seems like it could be making advancements in its industry, the next step is to research it and make sure the information you find about it is correct. The best way to do this is to use multiple sources such as different news outlets when researching a company. After researching the company and making sure it is legitimate, buying the company's stock will be a lot safer.
Making money from researching and buying one stock at a time can be good for quick returns, but in order to have safer investments, it is important to diversify your portfolio. Diversification happens when you buy stocks from different industries, so that any time a stock’s value diminishes, it only makes it so that you lose a small amount of money. Hopefully, any gains from other stocks in your portfolio can cover the amount you lost from that one stock. If a stock begins to decrease in value or it stops growing, you can sell your stock and then reinvest your returns into different stocks. This reinvesting is called compounding and can lead to being able to buy larger stocks or more of one type of stock than before. Compounding is an important part of investing since it takes the money you make and creates more money from it, leading to the popular phrase, “Let your money make money to make more money”. -_-
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