5 Things to Know Before Investing in Stocks

Determine Your Goals

Before you begin investing in stocks, entrepreneur and successful businessman, Shalom Lamm, says it’s important to determine what it is you want to accomplish with investing. Are you trying to build wealth? Are you looking for extra income? Are you trying to make a career out of investing? Essentially, goals can be broken down into two categories: short term goals and long term goals. A short term goal might prioritize making money fast, and is more risky. A long term goal might prioritize safety and assurance that wealth will grow as time goes on.

Know Where To Trade

There are many places to invest in the stock market. Some of them offer perks such as allowing customers to invest before the market officially opens, known as the pre-market. After-hours refers to trading that occurs after the market closes for the day. If these features are important to you, you should look for companies that offer this type of commodity.

Understand Volatility

Nothing is certain in stocks. As Shalom Lamm says,through all of his experiences, the stock market could skyrocket tomorrow, and then plummet the next day. Some stocks will perform better than others in the short and long term. The fluctuation of stock price is known as volatility. A volatile stock will take wild swings. It might start the day at $5, dip down to $2 in the afternoon, only to finish the day at $7. These wild swings can be too stressful for some traders. Less volatile stocks might not see any increase in price in a single month. It’s important to know which stocks are more and less volatile. You can determine this by looking at performance over a day, week, month, or year.

Shorting Vs. Longing

No matter what goal you have, you should always remember that everybody who invests in the stock market is trying to make money. Some people try to short stocks, while others try to long stocks. When you short a stock, you invest with the assumption that the price will go up in a short amount of time, allowing you to cash out quickly. When you long a stock, you invest with the assumption that in time, the stock price will go up. It can be beneficial to know which stocks are commonly shorted–that way you can either invest in it or avoid it altogether. There are even some stocks specifically tailored to those who want to long it.

Relationship With Current Events

Some stocks will fluctuate depending on what’s happening in the world at any given moment. For example, weed stocks. If weed were to be legalized around the world tomorrow, it would create a demand that would make the price of weed stocks more valuable. Another example is oil. As the world turns to more renewable energy sources, oil will become less valuable which will reflect in oil and energy stocks. As a matter of fact, the entire stock market crashed when lockdowns started due to Covid-19.