9 Ways to Manage Stock Risk for Beginner Investors
Stocks are high-return investments. But the stakes are also high. How to manage stock risk, especially for beginners? Here are tips for managing and facing stock investment risks in 2023:
1. First understand what stocks are
The biggest mistake I made when playing stocks before was that I didn't understand the essence of stock investing. Because I was in a hurry to get into the market, I honestly wanted to make money quickly, and I neglected to understand what stock investment really means. No luck, I was even stunned! From it I learned that understanding the essence of stock investing is very important for beginners. Because all the strategies, gameplay, and other aspects of stock investing are heavily influenced by our understanding and perception of what stock investing is. What is the essence of stock investing? In my opinion, buying stocks or playing stocks is basically an investment in a business or business. It makes no difference if I partner with a friend or close relative to invest in a coffee shop or laundry. By buying shares, I mean becoming the owner (shareholder) of the company and leaving the management of the company to a management professional who I think can manage the business to add value. company. Understanding like the above affects the way I invest. The calm way is to calmly face the sharp decline in the stock price, because the company's performance is not bad. Those who buy stocks when the market crashes because the stock price looks cheap and the company's performance does not slump in the slightest.
2. Don't forget to diversify your investments
As an investment tool, stocks definitely have risks, and these risks are definitely not small in stocks. The question is how to manage stock investment risk and diversify investments for beginners who are just learning stocks. Don't put all your money in stocks. With diversification, if the stock market crashes, you can survive rather than panic (which is important) because you already have savings in other vehicles that will protect you from stock market crashes. Financial planners mentioned the importance of having an emergency fund as a preventive tool, one of which is during an economic shock. Put some of your money into an emergency fund. In fact, diversification reduces the potential for returns because funds are placed on instruments with lower returns. But this is precisely the essence of diversification, which is to divide the allocation of capital into high-risk investments with high yields and low-risk investments with low returns.
3. Long-term stock investment! It's not easy.
The drive to make quick profits, to make high direct profits, has always been strong in stock investing. Humane, right! As an investor, you certainly hope that the funds you invest can immediately make a profit, and the sooner the better. Why is stock investing a long-term investment? I want to go back to my first point about the nature of investing in stocks, which is that buying stocks means that I am investing in a business. In my opinion, a business needs a process, it takes time to develop, and it finally brings results for investors. Is it possible to invest in a business that we expect to generate daily or weekly profits? This does not seem to be because business processes must be followed to achieve results. Doing business can't be instantaneous! Take at least 1 year to see how the business grows. The same goes for stock investing, it takes time for your money to grow and develop in stocks.
4. Keep an eye on stock trading!
For beginners who are new to stock trading, the temptation of big profits, and big profits in a short period of time has always been an attraction in itself. One of them is stock trading. What is stock trading? I rate stock trading if you buy or sell stocks in a short period of time, such as daily, weekly, or 1 day ("day trading"). Here are a few things to keep in mind when buying and selling stocks: First of all, stock trading takes time and effort because you have to monitor trades at all times. Can't disambiguate or leave another job. Despite the advancement of online trading technology, you should focus on trading which requires time and effort. Compared to ordinary businessmen who hand over the company to professional managers to manage and give results after a certain period of time (1 year or 6 months), in stock trading you have to monitor every day, even every minute, and expect the company to increase in value in 1 day! Secondly, and more importantly, the stock exchange hopes to benefit from daily stock price movements, while the name of the business or business (which is a reflection of the stock price) takes days or even months to increase the value of the assessed company. It doesn't make sense to me if we expect the value of the business to change in a few days or even 1 day (intraday trading). However, this is expected in stock trading.
5. Dollar Average Cost (DCA)
Regular monthly purchases of pre-selected shares at any price at the time. This method is called dollar cost averaging (DCA). An example is as follows:
- We will always buy shares 2 days after the specified payday.
- For example, the investment value of our savings shares is 10%. We deposit 1 million every month, and then 100,000 Indonesian rupiah into shares
- We bought shares worth Rp 100,000 at the current price. Whether the stock price is expensive or cheap, we don't care. Anyway, buy shares worth Idr 100,000 on that day
- The number of shares we get depends on the price of the stock when we buy it. With DCA, we build stock wealth over time. As income increases, savings increase and the amount you can invest in stocks increases.
6. Choose Blue Chip
The easiest way for beginners is to buy blue chip stocks. What are blue chips? Blue chips are the highest quality stocks of companies sold on the stock exchange. This type of stock is considered the safest and promises stable profits. To make it easier to imagine, take for example some of the leading stocks on the Indonesia Stock Exchange, namely:
- Bank BCA (Symbol BBCA) is the best bank in Indonesia with the largest ATM network, millions of customers and most importantly generates huge profits for shareholders.
- Unilever Indonesia (code UNVR) is the best consumer goods company in Indonesia with a variety of familiar brands of household products. UNVR's financial performance is one of the best for a consistently profitable stock.
- Bank BRI (BBRI code) is the most profitable bank in Indonesia. For more than 100 years, Bank BRI
7. Learn from stock mutual funds
If you are a beginner learning about stocks, one of the easiest ways to choose stocks is to look at the stocks owned by the fund manager who manages the stock mutual fund. Fund managers must submit a portfolio of the top 10 stocks held in equity mutual funds. You can see a list of the top 10 stocks in the Stock Mutual Fund Monthly Report. On the website of an investment manager or online mutual fund selling agent, you first select the stock mutual fund that you want to see the stock collection of. Then, in the Statistics or Monthly Performance section, you can see the top 10 mutual fund stock holdings.
8. Find valid information and participate in the GMS
In stock investing, the role of information is very important. The decision to buy or sell shares is based on the information held. The problem is, many people don't refer to valid information. Buy because of gossip, sell because people say the stock is bad. At the same time, there are actually valid sources of information that can be ascertained, and that information is free and freely available. what is it ? The manager of the Indonesia Stock Exchange, PT Bursa Efek Indonesia, makes information on companies whose shares are listed on the stock exchange freely available to the public. Even to access this information we do not need to be shareholders .
This information comes from the company and is not a rumor or the result of analysis, but official information issued by the company. There are several information that is very important for stock analysis, namely:
- Financial Reporting: Quarterly, mid-year and year-end reports on the financial condition of the company must be submitted. It is necessary to evaluate the performance of the company
- Annual Report: Must be filed at the end of each year and contain a comprehensive review of the company's prospects, operations, finances, and management.
- Corporate Actions: Reports related to corporate actions affecting stock prices
- Public Expose: Companies need to introduce the development of the company's performance to the public once a year. Access to exposure to public presentation materials. All of the above information is free. How to access stock information and reports is as follows:
9. Start a small business!
There is nothing more exciting than getting started. In fact, I started stock trading too soon and forgot to learn the basics. To start investing in stocks, you need to know the following: First, learn how to invest in stocks online. Today, online stock trading is the easiest and cheapest way to invest in stocks. Don't worry about opening an account, many securities support opening an account online, and documents can be delivered by express delivery, so you don't need to go to the securities office to open an account. Secondly, small capital is not a problem, because the minimum requirement for trading on the exchange is currently 1 lot, which is 100 shares. For example, to buy BCA shares, you need 3 million rupiah to buy 1 lot (the price of BCA is 30,000 rupiah per share), while BRI needs 400,000 rupiah to buy 1 lot of shares with a share price of 4,000 rupiah. Third, choose the stock you want to buy.
And In the end, we have to decide which stocks we choose to invest in. Returning to the previous point, I recommend starting with blue chips. However, stock investment decisions are very subjective, and what works for me may not work for you. Fourth, create a stock investment budget every month and make a stock saving plan. I started with a monthly investment of Rp 1 million and continued to increase as my income increased. The most important thing is consistency. Even when the storm hits, the market collapses, and the economy sucks, I try to stick to the budgeted funds as much as possible.