5 Considerations to Make When Investing in Shares

Investing in shares is not something for the faint-hearted. Share markets are volatile, meaning that share prices are just as likely to fall as they are to rise. A great deal of knowledge is required to successfully invest in them as well as some luck. For those that get it right, the gains can be well worth it. The alternative is, of course, that we put our money in a savings account that barely earns any interest, so in real terms is losing us money.

So, to what we should consider when investing in shares and the different stock markets around the world. This is whether they are in London, New York, Tokyo, Hong Kong, or Shanghai.

Keep Up-To-Date with Company News

When you have money invested in shares, unless you rely solely on a stockbroker or financial adviser, it is worth keeping up-to-date with the news about companies and how they are performing. This news can come when their financial results are expected or released, or at other times when something happens that perhaps results in a change of directorship.

News about companies can be obtained from studying either paper or digital versions of financial affairs. Money matters are not necessarily going to make general news unless they are big headlines, by which time it is likely too late for you to adjust your portfolio to avoid any losses. So, stay ahead of the game and be good at anticipating things.

The kind of news that will make a difference to share values will come from the announcement, or mere hint, that there is going to be a merger or takeover. These are something to look out for. Generally, from mergers, shareholders will experience a good long-term performance and better dividends from the company they are investing in. It is encouraging to note that when economies are good, the new-formed entity’s stock price will usually exceed that of the underlying company during the pre-merge stage. This then benefits the investors of both companies. It is also considered that during a takeover the value of shares should rise. That is whether replacement or cash ones are offered.

The Waiting Game

Be prepared to leave your investment untouched if a company’s share price should fall. This is because the reason people lose money by investing in shares is that they cannot afford to leave their money in until a share price rises again. Sometimes investors become impatient waiting for share prices to rise again and move their money elsewhere.

However, there are instances when walking away from a company with your money can be the right approach. There are examples of shares prices that have not recovered. So, consider carefully whether it may be time to cut your losses when bad news, and then more bad news, is reported. It is a judgment call, as always.

Spread the Risk

Do not just invest in one company, because if they hit hard times, so will your fund. It is, therefore, better to spread your risk by investing in a portfolio of companies that all look promising from an investment point of view.

Invest Globally

Avoid investing in just one country as the state of global economies will affect share prices. For instance, the inflation rates, interest rates, and balance of trade in a particular country all impact the performance of companies that are based in and trade from them. So, invest in good economies, not ones known to have encountered financial problems and collapsed. Also, invest in several and not just one. This mitigates the loss should something happen politically or economically within a certain country that affects a company’s results and investor confidence.

Timing Your Investments

It is good to invest when share prices are at their lowest levels, or at the point when a company has just been floated on the stock exchange. Then you are much more likely to see a share price rise and earn you money. A company doing well right now might seem like a good thing to invest in, but if the share price has peaked, then there is only one way for it to go. So, there is a right time and a wrong time to invest.

To summarise, when investing in shares we should give thought to what is happening in the news that might affect the companies that we are investing in. We should be prepared to leave our money invested in companies whose share prices may rise again after a fall. Some tips for not losing too much money, when economies can be unstable, is to spread the risk between investing in different companies and countries. Then, timing when to invest is crucial, as you do not want to invest in a share price that has peaked and can only fall and make your shares worth less than you paid for them. Instead, look for opportunities where share prices are on the rise and so have not yet peaked. That is the key to investing in shares and earning a good return.

 

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