As an entrepreneur, investing in the stock market is likely to appeal as it has the potential to be high risk and high reward – a good match for an entrepreneurial mindset. If you’re just starting out though, how do you know which stocks to buy?
Let’s take a look at some of the key points to consider when choosing stocks that are going to work for you and your long-term financial plans.
Assess your Attitude to Risk
Understanding your investment style is vital, and a big part of this is how much risk you’re willing to take. As an entrepreneur, you may feel more comfortable taking risks than a lot of people, but it can also depend on factors like your age and retirement plans – if you’re planning on taking early retirement for example, this can impact your choice of stocks.
Try taking this risk questionnaire from Fidelity to help you understand your attitude to risk and your motivations. Once you have a good idea of where on the scale you lie, you can choose stocks accordingly.
Look at the Global Context
No man is an island, and the same is certainly true of stocks. While their value will be determined partly based on conditions and performance within the company, the broader economic and political climate will play a huge role. You only need to look at the last few years to see this in action – Covid, the war in Ukraine, the energy crisis and soaring interest rates have all played their part.
You’ll be used to this as a business owner, and will likely already have your finger on the pulse of the international economy, but before you buy stocks, it’s useful to check for any upcoming global events that might affect share prices and impact when you should buy. A tool like the economic calendar from Trading View is an easy way to see important events from all around the world in one place.
Keep a Balanced Investment Portfolio
As an entrepreneur, you will already appreciate the old adage of not putting all of your eggs in one basket, and this certainly applies to buying stocks. Even the most adventurous of investors will want to spread out their risk by buying a good range of stocks from different sectors and sizes of company, so if you’re adding to your portfolio it’s good to look at where you might have gaps.
When looking at individual stocks you can also apply your attitude to risk results, by looking at a stock’s beta. Beta is a measure of volatility and can help you assess how risky a stock is. Investopedia has more detail about what beta means and how to use it.
Conclusion
Investing in stocks can be both profitable and exciting, but it’s important to do your research and take expert advice where appropriate for the best results.
Always remember that the value of your investments can go down as well as up.
