5 important things before buying stocks

Investing in the stock market may be a good way to achieve financial goals and reap profits, but there is always a degree of risk associated with making a profit. In fact, you should think about risk before thinking about profit. When you invest in stocks and the market does not work well, you may lose your money, and one of the ways  Where the risk can be reduced is to balance the risks and rewards in the stock portfolio.

There are some important actions when building a portfolio that may help you manage your portfolio and reduce risk.

First: sector diversification

After determining the companies that intend to buy their shares by knowing the company's activity and reviewing its financial indicators and sources of profits, it is important that these companies come from several different sectors, not less than 6 or 7 sectors, to contain risks such as stagnation that may affect one of the sectors and cause a loss, but the rest of the sectors may work well  Good and to take advantage of the profits that may come to a sector without other sectors.

Secondly: buy stocks

It is preferable to buy shares in different batches and periods of time. For example, if you want to buy the shares of a company, the capital allocated to buy this stock is divided into batches and at different time periods to achieve the average price and ensure that you do not buy at a high price, and always remember that it is normal for minor fluctuations in stock prices, so it is advised that  The difference in price is between 15-20% between each batch you buy of the stock.

Third: the type of stock

The portfolio must contain dividend stocks, which are also called income stocks, and this type of stock is characterized by cohesion more than others in times of crisis because investors do not give up easily because of its periodic dividends.
There are also growth stock companies. It is true that this type of stock is often characterized by a low cash distribution ratio because it retains profits or part of it and reinvests it, but it is characterized by the high prices of its shares in the future.

Fourth: the cash flow of the portfolio

It is better to distribute portfolio investments among companies with different distribution policies quarterly, semi-annual or annual, and to ensure that there is a continuous cash flow to the portfolio.

Fifth: Stop loss and compensation

The principle of stop-loss is in the sale of shares that incur a large loss and that there are indications that the company’s situation may worsen further, selling in this case and losing a small part of the money is better than losing most of the money, and it is preferable to compensate for the loss by adding a new share to the portfolio rather than buying  The same stock because it may continue to fall further.

In the end, the decision to create and manage the investment portfolio belongs to the owner of the portfolio and what he wants to achieve from his investments. Does the person want a large percentage of risk in his investments in exchange for large returns, or does he want a small percentage of risk with limited returns?  Here there is no fixed and specific rule for creating a wallet, but only guidelines and tips.

Finally, I hope you will benefit from this article