What Are Some Investment Tips for Beginners in the Stock Market?


Quick Answer

Mitch Tuchman of Forbes recommends beginning investors diversify their investments by investing in exchange-traded funds, cut risk through portfolio management and take a long-term view of investments without becoming concerned with daily market fluctuations. Analyst Jim Cramer advises beginning investors choose stocks rather than low-yielding savings accounts and certificates of deposit, choose riskier stocks if they are young and begin retirement savings as soon as possible, according to Abigail Stevenson for CNBC.

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Both Tuchman and investment adviser Suze Orman recommend exchange-traded funds to beginning investors because ETFs allow investors to own parts of many different companies without necessarily investing large amounts of money. ETFs that track the S&P 500 or Nasdaq 100 indices give investors the benefits of diversification and low expense ratios in a single purchase, explains Investopedia.

Both Orman and Cramer recommend investors start as early as possible to reap the benefits of years of returns. Though stocks fluctuate from year to year, owning stocks over long periods of time is the most important factor in investment success, notes Orman. Investors who start in their 20s have the advantage of a long enough horizon to invest in riskier companies and the potential benefits of the higher returns that accompany that risk, states Stevenson.

Tuchman and Cramer disagree on the optimal portfolio allocation for beginning investors. Tuchman advises a diversified portfolio to smooth out the gains and losses of the stock market, while Cramer says an all-stock portfolio is fine for young investors because stocks typically have higher returns.

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