Stock Market For Newbies: 8 Tips You Should Know (3 of 5)

4. Understand that the market ebbs and flows

The market moves up and down like a rollercoaster. When the economy heats up, it is bound to lead to sell-offs. But don’t panic. Inexperienced investors have a tendency to panic sell when the price drops, but then buy only after the stock has returned to higher levels. Just be patient and look at your investments from a long-term perspective. This is yet another reason why you should consider index funds rather than individual stocks. Historically speaking, the stock market has always made gains over time even if individual companies never return to all-time highs.

5. Try a stock market simulator before investing real money

Want to test out your stock trading prowess before actually investing money? Stock simulators with virtual dollars allow you to see how you would do in real life, but without any of the actual risk. It will also allow you to determine how you would respond to gains and losses before you take the plunge. You might just come away humbled, which is a good thing since it will dispel the belief that you know more about the stock market than everybody else.