Investing In The Stock Market? Read This First

Investing In The Stock Market? Read This First

Posted on September 15, 2012 by William Tan in The Smart Investor

Even very experienced investors can still have difficulty playing the stock market. You can be extremely successful, or you could end up losing money. In order to make your investment decisions with the greatest possible wisdom and potential for profit, you need all of the stock market know-how you can get. This article can help.

Beginners should know that stock market success does not happen instantly. Many times, specific company stocks can take one to three years to show positive movement, and inexperienced investors pull their money out too soon because of fear, ignorance or impatience. In order to become a successful investor, you need to have patience.

Tune out stock and investment tips that you didn?t specifically ask for. Your broker or financial adviser offer solicited advice, and that?s worth taking. Disregard what all others say. It is impossible to know the bias that may come with unsolicited advice, so don?t rely on others to do your own ?due diligence? research.

Before you invest into any stocks, do your best to set some goals for yourself. As an example, you might be looking to get income with a low risk stock or perhaps looking to expand your portfolio?s size. Knowing what your goals are makes it easier to develop a strategy that gives you the best chance of success.

The general rule of thumb for novice stock traders is they should begin with only a cash account and not trade on margin. Cash accounts carry less risk because you control the amount you can potentially lose. In addition, they are generally a better way to get acclimated to how the market works before you go all in with a higher-risk marginal account.

Buy Stock

When you buy stock, pay attention to the volume that is traded each day. This is just as important when knowing the commission on selling and purchasing stock. When you buy stock when it has a lower volume, the stock won?t trade as much as one with a higher amount. In some cases, it can be rather difficult to sell that company?s stock.

Exercise caution when it comes to buying stock issued by a company that employs you. While owning stock in your employer company can make you feel proud, it still carries a certain degree of risk. If anything happens to the company, you will not only lose your paycheck but your investment, as well. Conversely, if the company has a solid history and employees can buy shares at a discount, this could become a very lucrative opportunity for you.

Remember the key rule of investing which is you can?t invest money that you really can?t afford to lose. This is especially true for high-risk investments. Always know that you might suffer a loss, even with long-term, safer investments. Keep your money in the bank and not stocks if you need it for any financial obligations in the future.

Develop a great strategy for investing, and stick with that strategy. You might be looking for companies with consistently high-profit margins or alternatively ones that have a ton of available cash. There are many investment strategies that suit all kinds of people. You need to find the one that suits you.

Make sure that you observe the stock?s overall value in combination with the price. Is the stock suitable for holding over the long term? If the stock?s price seems to be abnormally low, research this before you decide whether or not to buy the stock. Avoid purchasing cheap stocks unless you know that there is a possibility of making money from them.

Be prepared to make long-term investments. The stock market is extremely volatile. People who believe that they will only be in this market for a short period of time will usually lose money. If you can handle some losses at certain periods, realizing that you are in it for the long haul, it can be quite rewarding for you in the end.

It is important to keep you with a business?s dividends if you own stock from them. If you are an older investor, you?ll want to put your money in stocks that provides stability and one that will pay solid dividends. Companies that have large profits typically reinvest it back into the business or pay it out to shareholders by dividends. It is important to know that the annual shareholder dividends divided by purchase price equals a dividend?s yield.

Do not be too quick to follow the lead of others when you invest. Advice from others can be helpful, but depend on your own research and instincts. It is a good idea to trust your instincts when you are investing. If something does not feel right or there are any questions about an investment, this is the time to listen to your feelings and stay away from that investment.

There are many choices you can make that will affect how successful you are in trading stocks. Instead of risking money, apply the tips you have just read to earn the best return.

Don?t become obsessed or overly emotional about your trading. Hoping that a falling stock will recover is not going to make it happen. If a stock?s value is plummeting, it is not a good idea to pump more money into it, hoping that it will turn around. Use your head when investing, think clearly, and don?t let emotions rule your portfolio.

Source: http://www.compoundedknowledge.com/investing-in-the-stock-market-read-this-first/

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