As a first-time investor, I’d take these 2 actions

January starts with a bang and many resolutions for the year ahead. But now, some of those good intentions may be fading into memory. What if I have decided to start investing in the stock market for the first time? I will take advantage of the current market to make the resolution a reality.

Specifically, here are some steps I would take as a first time investor that will hopefully increase my chances of financial success.

1. Learn all about value

Think about the items you have. Now decide exactly what the price is. Not just for you, but objectively.

The exercises seem simple, but they can be very difficult. Selling these items online can attract hunters who want to pay less than they are worth. Getting the seller to buy it involves someone taking a cut.

So the market value of the item may not be what the seller would pay, because he also has to make a profit. But without access to a dealer network, you may struggle to find buyers. Or maybe a lot of other people are selling the same thing right now, meaning supply outstrips demand.

The stock market works the same way. Investors can price the same stock very differently within a few months.

But I share easier than many items for objective value. After all, they are shares in a company that will hopefully generate profits in the future.

One of the most important lessons for a first-time investor is to learn the value of stocks. If the price is higher than the stock price, buying it can be profitable. But if the price is higher than the value, the purchase may cause me to lose money. Price tells me what I pay for the show, but the price helps me know if it’s really worth it.

This is important information you need to be successful as an investor. Exploiting the gap between short-term price and long-term value can be profitable.

2. Focus on risk over reward

Buying stocks is something that people do with the hope of increasing their wealth. But they often overemphasize the upside potential without fully processing the risks.

Think about it BP Prudhoe Bay Royalty Trust precedent. This gives a dividend yield of 29%. If the payment continues at that level, in four years I have recouped what I spent on shares in cash – and still have.

But there was a catch. Trust dividends are calculated using a sliding formula which means they will decrease over time if oil prices do not rise. If the price of oil returns to a certain level and stays there long enough, the dividend will stop forever according to the deed that created the trust.

I think risk is more important than reward as an investor. One big risk can wipe out big rewards in my portfolio. Instead of buying stocks for bigger potential returns, as a first time investor, I would try not to be greedy.

Instead, I would build my portfolio around key principles to try to manage risk, such as diversification.