15 Basic Investing Rules All Beginners Need to Know

If you’re new to investing in stocks, the sheer quantity of investing opportunities available to you might feel overwhelming. The truth is, you don’t need a special set of skills or expert knowledge to become a successful investor. However, there are some important things you should know before you start your journey to achieving a stronger financial future.

On that note, here are 15 basic investing rules all beginners need to know.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Every investor makes mistakes, even the most seasoned ones. Whether it’s buying a stock that turns out to be a dud, waiting to invest in a company until it’s exhausted its upside potential, or otherwise, no investing journey is without a few bumps in the road.

Lean into any mistakes you make to help you fine-tune your investing strategy and secure any vulnerabilities in your portfolio.

ALSO READ: Investing in Stocks for Beginners

Long-term investors don’t need to treat the stock market like a complex guessing game in order to build a market-beating portfolio. Instead, you should invest regularly in quality stocks -- that means investing when the market is down just as you would when it’s up.

Few investors earn life-changing portfolio returns overnight. Your portfolio’s value will fluctuate with time, and it may suffer temporarily in stretches of market downturn.

Instead of trying to find the perfect market moments to invest, consistently putting your money toward high-quality companies that can supply long-term value and growth is the single best way to construct a rock-solid portfolio that can withstand a variety of market situations.

One of the essential aspects of a market-beating portfolio is diversification. This means that instead of putting all of your money into a few similar stocks from just one or two industries, you should invest in a broad array of companies and sectors with varying risk profiles and growth potential.

ALSO READ: 3 Stocks Ready to Bounce Back in August

Many investors are afraid of taking on too much portfolio risk. And after the market events of the past year-plus, that’s certainly understandable.

No investment is entirely devoid of risk, but the amount of risk you’re willing to maintain in your portfolio is completely up to you. There’s nothing wrong with being a more conservative investor that leans in the direction of lower-risk investments with minimal volatility, just as there’s an argument to be made for long-term investors who prefer a mixture of tried-and-true stocks with a few high-risk, high-reward investments.

If you’re new to stock trading, it’s important to understand where your preferences fall on the spectrum of risk and the types of investments that most align with your personal investing thesis.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Focus on companies with strong track records of growth and attractive competitive advantages that can drive portfolio returns over years, not just weeks or months.

And only invest in companies that you’re committed to holding for several years at the absolute minimum. This can help you weed out fad-driven investments from the best buys for your portfolio and your personal financial goals.

Just because the market hits a rough patch or even crashes doesn't mean that investors need to panic. When you drown out the market noises of fear, refuse to panic sell your stocks, and continue investing amid both the peaks and valleys of the market, you can continue moving toward your financial goals, minimize your losses, and maximize your long-term returns.

ALSO READ: The Top 50 Robinhood Stocks in August

If you’re new to the world of investing, right now is the time to work on outlining your long-term financial goals. This will help inform the types of investments you want to make, the level of risk you’re comfortable keeping in your portfolio, and the most advantageous ways to invest your money.

The market is unpredictable, and its cyclical nature means it will rise and fall periodically. Trying to speculate about what the market will do in a particular window of time rather than consistently investing in top-notch stocks won’t necessarily help you make the best investment choices. Plus, you could end up losing a lot of money over the long run.

There’s no single ideal time to invest, and every type of market has its pros and cons for investors. But investors with a years-long investing horizon can identify hot buying opportunities in all kinds of market environments, because they’re thinking in terms of a company’s durable growth story and not only of its near-term stock movements.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

While you don’t need to be rich nor do you have to be completely divested of debt to invest in the stock market, investing shouldn’t prevent you from meeting your financial obligations or having a solid nest egg set aside for a rainy day.

If you have some cash set aside that you think you’ll need in the next few years, these are funds that you probably shouldn’t put toward investing in the stock market.

ALSO READ: Options for Beginners: How to Pick Your Targets

It’s important to thoroughly acquaint yourself with a company before you invest in it, to ensure you understand its business and that it’s the right fit for your portfolio and financial goals. This means examining everything from a company’s financial statements to essential metrics like its price-to-earnings ratio when researching a stock.

There are a variety of strategies investors use to boost their portfolio returns, from growth to value investing. Dividend investing is another popular strategy to realize optimal investment gains.

Not only can you achieve portfolio growth through share price increases but you’ll receive regular income in the form of dividend payouts from the company. You can then use these dividends to put back into the stock market and grow your portfolio, add to your savings stash, or both.

Just as it’s important to research a company in detail before you buy in, you should also stay up to date on any developments that affect your long-term investment in order to maintain a clear picture of the entity’s ongoing financial situation and growth prospects. For example, in addition to keeping up with the company’s quarterly and annual earnings reports, you should also pay attention to key press releases, such as those pertaining to business developments, product updates, and financial news.

ALSO READ: 4 Stock Market Myths to Abandon if You Actually Want to Make Money

Wealth building through the stock market is a gradual process. If you take the time to properly research stocks before you buy, only invest in high-quality companies with strong fundamentals and the ability to support long-term growth, and have the patience to let your investments bear fruit over time, you can build a portfolio that flourishes through the years amid market highs and lows.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

If you’re new to investing, you might be particularly nervous about the possibility of an impending market crash. The good news is, you don’t need to fear the next market downturn.

First, it’s important to remember that market crashes are generally short-lived and typically occur right before the market rebounds once more, often erasing losses that many stocks experienced during the downturn.

Second, remember that even stocks that are perceived as having particularly low volatility can still see a period of decline in the aftermath of a crash. A stock’s movements over a few weeks or months don’t make or break it as a quality investment.

Third, the only way to lose money when the market tumbles is if you sell your stocks. Temporary price changes that drag your portfolio’s valuation down over a few weeks or months don’t inform the long-term growth trajectory of your holdings. If you do go ahead and sell some of your stocks because the market crashes, you’ll take what would likely have been recoverable portfolio value and turn it into an actual loss.

Finally, market crashes usually provide a unique opportunity for investors to buy shares of stocks at far more affordable valuations than usual. When the next market storm comes, you would do well to have some cash set aside that you can use to snap up some top-quality buys for a bargain.

The Motley Fool has a disclosure policy.