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It is very interesting to choose stock investment for pension; No need to study MBA, no need to be smarter than Wall Street people, everyone can do it. But before investing in stocks, you need to know one thing: when you invest in stocks as a retail investor, the income you get from your portfolio is mostly lower than that you get from investing in public funds to buy stocks. This is because public fund managers usually have more ideal information channels and are more professional.
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By following these steps, you can narrow the gap with professional investors who make money for you.
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1. Just a little. Only take 10% of the savings and investment to directly speculate in the stock market. It doesn’t matter how you manage 10% of your capital by entrusting your large financial assets to professionals.
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2. Either enjoy it or don’t do it. Choosing stocks for yourself may reduce your investment income. If you don’t like it, just don’t do it. If you find it exciting to speculate and observe the performance of stocks, you can do it as a fun and educational thing.
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3. Don’t be proud. When reading this article, few people who have just started to speculate in the stock market will think that their performance in the first year of their own stock trading has surpassed the overall market performance and the public funds they have purchased. I’m sorry, it’s not because you’re smart. This shows that the market changes randomly, and you are lucky. Few of you can perform well for two consecutive years. There is no doubt that no one who reads this article can surpass the overall market performance for 10 consecutive years.
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4. Buy stocks you know. If you are more familiar with some enterprises, it is easier to understand their business models and business prospects; When buying stocks, future expectations are more important than past performance.
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5. Buy after mastering the basic concepts. Even if you know something about an enterprise and think it is good to invest in it, you must do some “basic research” before investing. At least know the price/profit margin, debt to equity ratio and profit margin (refer to an article in FamilyShare 5 for an explanation of the above ratios).
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6. Diversification. No matter what happens, no matter how much you like to buy stocks, no matter who advises you to buy stocks, you should never bet more than 10% of your money on one stock. In portfolio investment, the money should be allocated to at least 12 stocks; In this way, the average rate of return on investment can approach 8% – for every 10000 dollars invested, the return is nearly 800 dollars. One key to diversification is to select 12 unrelated stocks. If you hold the shares of Ford and General Motors at the same time, you will not be able to achieve investment diversification. It is enough to choose one from the other.
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The longer you invest in stocks, the more you can understand various investment terms and processes. Keep these six rules in mind, and you will find it very interesting to speculate in the stock market, and will not destroy your retirement plan.