Investing in stocks: What you should know?

Since the inception of the stock market, which dates back to the early 1600s when seafaring merchants from Europe issued shares in return for profits of successful voyages to the East, stocks have been designed to rise in value over time. That is why a long-term investment strategy is likely to reap rewards.

It makes sense to hold stocks for a significant period of time. Investors should not be too disheartened by a short-term loss in the stock market. Stocks have cycles, like everything else, but the cycles, generally speaking, have an upward direction, and every once in awhile you get a correction. A market crash could take you down 20 per cent, but as long as you hold it through, history would suggest it is only a matter of time before it recovers and returns to profitability.

In the stock markets, so long as you are not investing in a company that goes belly up, or has an existential crisis, then your investment is designed to appreciate in value over time.

Furthermore, ask any trader worth their salt and they will inform you that a diverse portfolio is paramount to success in the stock market. Try to diversify yourself with stocks across different sectors, because your level of risk will reduce. Don’t try and make a once-in-a-lifetime call. For instance, if you had invested $10,000 in Amazon at the very beginning you would be a billionaire by now, but if you put all your eggs in one basket it is very risky.

If you invest in stock markets and have a diversified portfolio then statistically speaking it is possible to generate around 10 per cent gains per year. But what stocks to invest in? In the long term it is very helpful to invest with your heart. Most acquisition comes from personal brand connection, be it Amazon, Netflix, Apple, Google, Nike, and so on. It is encouraged to follow your gut, especially if you are of the opinion that a specific brand is going to be more dominant or profitable in their industry in the coming decade. It has to be more than your gut feeling, though; it pays to make sure you understand the organisation in which you are investing.