Global financial markets have become increasingly volatile amidst the turmoil caused by the ongoing COVID-19 pandemic. This year the FTSE100 saw some of its biggest losses since the stock market crash of 2008. Sure, it sounds a bit like a doomsday scenario, and for some investors, this may very well be the case. On the flipside, however, is that market falls are often the best time to find yourself a good bargain. For the novice investor, the time may be perfect to make your first foray into the stock market as long as you follow a few golden rules.

Acknowledge The Risks

Before venturing into the unknown, you need to acknowledge that by definition the nature of the stock market is highly unstable. Investing is a high-risk game that can lead to loads of anxiety and sleepless nights. Honestly, it’s not for everyone so it’ll be up to you to assess your level of risk tolerance and how much you’d be willing to lose should worse come to worse.

Do Your Research and Choose Stocks Wisely

Bear in mind that by investing in a company’s stock, you’re essentially becoming part-owner of that enterprise. Use online tools to educate yourself on the process of investing and do some background research on the best stocks to invest in. It’s always wise to start small and buy into companies that are well-managed and trustworthy.

Have A Diverse Investment Portfolio

Never has the age-old saying of not keeping all your eggs in one basket ever been more true than in reference to investing in stocks. One of the best ways to manage risk is to invest in a broad range of industries, companies and sectors. This means that if one stock fares badly, at least some of your investments will remain stable. Having a diverse portfolio also allows an investor to make up for losses more easily.

Think Long-Term

Due to the volatile nature of the markets, before you start investing evaluate the purpose of each investment. Do you want some extra funds to supplement your retirement? Is it to help with your children’s college fees? Having end goals will help you decide whether or not to invest in a particular stock and exactly how much to invest in order to reap rewards at a certain point in the future.

Only Invest Using Surplus Funds and Know Where To Draw The Line

Investing in the stock market shouldn’t have an impact on your day-to-day living expenses or the funds you might need in case of an emergency. You shouldn’t let your investments significantly impinge on your quality of life. It’s also important that novice investors don’t get carried away and invest beyond their means, especially after they start seeing positive results. Playing the stock market is a bit like gambling and it can easily backfire if you become greedy.

As we look ahead into our uncertain future and the nature of industries change dramatically, it is important to make sure you do the adequate research, monitor markets and ask yourself if investing is right for you. Consulting experts, through the use of tools such as WallStreetZen's analyst predictions, is also a wise idea when it comes to taking calculated risks with your money. Good luck!

By Kelly Reed

© 2020 Copyright Kelly Reed - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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