The goal of investing is to maximize returns to their fullest capabilities without severely increasing risk. Sure picking the stock securities is the easiest way, but is not the only route. Here are 5 simple tips that will boost your gains in the long run:
1. Avoid day trading - Excessive trading is usually the #1 culprit too many investors participate in. The more trades you make, the more commissions you will pay which hurts your returns. Discipline yourself to make investments and stick with them.
2. Use Stop and/or Limit Orders - Ditch the market trades and start taking command of your buying and selling.
A stop order is the upper price limit that you’re willing to pay for a stock investment. Once the price reaches your designated stop price, the broker buys the security for you.
A limit order simply assigns the lowest price you want to pay for a stock. Once the stock price sinks and reaches your limit, the trade is made. Using stop and limit trades can accelerate your gains because you dictate the settlement price on a security.
3. Reinvest your dividends - Dividend reinvestment is an easy way to increase your holdings in a stock without lifting a finger. Once a company pays shareholders a dividend, your broker automatically purchases more shares at no cost to you. Please take advantage of these free trades. Start reinvesting those dividends if you haven’t already because you’re missing out on huge gains!
4. Follow your investments - This step is completely obvious, but many financial investors do not track their investments. Whether you invest in mutual funds, stocks, or ETFs, stay on top of them. Just as you wouldn’t want to fall behind on your job and/or class work, the same principle applies in investing. The more you know your investments, the better you become at investing.
5. Stick to your investment plan - The most important step is planning and executing. The key is to remain patient and again disciplined. If you haven’t created an investment plan, this is now your first step. It’s never too late to plan. You can follow these 5 steps without changing a single investment in your portfolio. If you have any tips of your own, feel free to comment on them.
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