The stock market is never entirely predictable, but some periods are more turbulent than others. This is the situation for beginners who are trying to start investing for the first time during a volatile market.
While it may be challenging to enter the market under such conditions, it is still essential to get started early so that your money has more time to grow. Here are some tips that can help you navigate the current environment and make wise investment decisions.
Diversify Your Portfolio
One of the most effective ways to limit losses during periods of market volatility and set yourself up for gains when the market rallies is to diversify your portfolio. As a beginner, it is critical to have a mix of stocks from different market segments. To accomplish this, consider purchasing stocks from various sectors such as energy, healthcare, technology, and consumer goods.
You may also want to add exchange-traded funds (ETFs) to your portfolio. ETFs are investment funds that track the performance of a particular index, such as the S&P 500, and are a good way to diversify your portfolio. If you purchase shares of an S&P 500 ETF, you are effectively investing in the 500 largest publicly traded companies in the market.
Take Advantage of Fractional Shares
When the market is shaky, investing too heavily in one stock can be risky. Therefore, it is wise to spread your money across different stocks. However, some stocks have higher share prices than others, making it challenging for beginners to buy them in large quantities.
Fractional shares can help you invest in higher-priced stocks without creating an imbalance in your portfolio. Fractional shares are portions of a single share that you can buy. For instance, suppose you have $2,000 to invest, and a company’s share price is $500.
Buying one whole share would mean putting 25% of your portfolio into a single company, which could be risky. By purchasing a fractional share, such as one-fourth or one-third of a share, you would be reducing the level of risk associated with investing in a single company.
Don’t Check Your Portfolio Balance Every Day
The stock market can fluctuate wildly, even in the best of times, and especially during times of turbulence. Checking your portfolio balance every day might cause you undue stress and lead to making impulsive decisions, such as dumping stocks when their value declines, and locking in losses as a result.
Making a commitment to refrain from checking your portfolio on a daily basis is crucial. Instead, review your portfolio regularly but do not obsess over it. Remember, investing is a long-term game that requires patience and discipline.
Starting to invest for the first time during a volatile market may seem challenging. However, by following the tips above, you can establish a solid foundation for long-term success. Investing is not a get-rich-quick scheme, but rather a journey that requires discipline, patience, and a long-term perspective.
Therefore, as you start your investment journey, keep your goals in mind, review your portfolio periodically, and stay committed to your investment plan. The road to financial freedom is not easy, but it is worth the effort.
