Making investments is an excellent method to increase your wealth. Particularly when you invest wisely. But the beginning can be a daunting task and even novices can make costly mistakes. Here are some guidelines to avoid costly errors in the market.

1. Understand the fundamentals of investing.

The stock exchange is where securities like stocks, corporate or government bond and exchange-traded fund are traded. It’s a sort of auction in which a publicly traded company sells its shares to investors in exchange for capital. Investors purchase or sell shares based on their expectation that the company value will increase or decrease. The price of a share is affected by many aspects, such as the state of the economy, environmental disasters, and war.

2. Keep your investment goals long-term.

Most financial experts recommend that you invest in the stock market for the long-term at least five years or more. This gives you time to build up your investment, and to weather the inevitable losses that come with volatile markets. However, many new investors are enticed by quick gains or lose their vigor during the inevitable declines in the market. They then sell off their investments too quickly.

3. Diversify your portfolio.

Diversifying your portfolio will lower the risk. Diversifying your portfolio into different industries, asset classes and geographical regions is essential. It’s also important to stay clear of putting too much of your funds into a single company. This is known as “concentration risk” and it could be fatal if the company is facing issues such as regulatory issues or public relations problems.