New investors looking to start trading in the stock market may feel like they’re gambling with their money haphazardly. And without a basic understanding of what they’re getting into, they wouldn’t be too far from the truth.

Trading in the stock market, however, is not about the luck of the draw — it’s not like betting money at a casino. A huge portion of people invested in the market show yields of profit, and achieve those not through chance, but by deploying risk management strategies that have long been proven to work.

Here are some of the best stock market tips we have to offer new investors.

First, stock trading shouldn’t be thought of as a get-rich-quick scheme. Very few investors hit the jackpot in a short period—and that’s especially true for first-time investors. Successful market investing involves formulating a long-term vision for your future. What does your retirement plan look like? Do you need to start saving for a down payment on a house?

Everyone has different financial goals. Identifying them will help you better strategize towards prosperous investing. Knowing approximately when you will require a certain amount of funds, for what purpose, and knowing exactly how much you currently have to work with, all factor into building a well-grounded financial outlook.

Also, the earlier you save, the greater your overall return over time. Portfolio growth depends on three things: the amount invested, the yearly profit rate of that investment, and the length of time it’s invested.

Self-assessing your risk tolerance is critical, and can vary as widely as each person’s financial goals. Deciding how much capital you are willing to risk is based on many factors, namely your gross income (and resulting discretionary income), debt considerations, monthly and annual expenses, as well as current and projected financial commitments.

Investing within your risk tolerance also reduces anxiety surrounding that particular investment. Worrying about the risk of losing a significant portion of one’s total capital may negatively affect investment decision-making. And emotions—especially panic—have no place in the investor’s portfolio.

Market lexicon includes the terms “bear” and “bull” to describe pessimistic and optimistic investors, respectively. Your style should not reflect either extreme, but operate moderately somewhere down the middle.

Paying excessive heed to sensational financial news, or unsubstantiated rumours amongst financial professionals, detracts from one’s ability to deploy logical and systematic assessment skills. Weigh the opinions of others carefully and objectively.

But before you can make any trading decisions you will, of course, need to learn about the basics of the stock market itself. For instance, what’s the difference between individual stock trading and mutual fund investing? Can you differentiate a put option from a call option? What exactly is a P/E ratio? You should be comfortable answering these kinds of questions before you get comfortable investing your money.

Online resources, such as podcasts, tutorial videos, and other online support services, are a good place to start. Spending extra for a consultation session with a financial professional may also be wise. Consider the cost of speaking with a professional as an investment against future losses.

Once you’ve become familiar with the basics of the stock market, it’s best to start building a diverse portfolio. At this point in your research you may have already come across the advice that, in terms of the stock market, it’s not wise to put all of your eggs in one basket. By diversifying the asset types in which you invest, you prevent losses in one particular business, one particular sector, and even one particular country, from affecting your entire portfolio. Conversely, profits made in one area counteract losses in another.

As investing tycoon Warren Buffet said, “Risk comes from not knowing what you’re doing.” Before you make the decision to start investing, first get acquainted with market. Once you’re in the market, learn everything you can about how to remain there while profiting. And, again, remember: the earlier you begin investing, the more likely that investment is to grow over time.

Featured Image: Depositphotos/© wrangler