Investing in Stocks

These days, many people set aside a portion of their money to invest in the stock market. This can result in a large payoff in the long run, as long as you are aware of the pitfalls and the best ways to invest. However, if you are new to the stock market and just looking to begin investing for the very first time, then you may be feeling a little bit lost and wondering how to get started. Luckily, there are some simple tips you can follow in order to make your entry to the stock market a successful one.

Stock Market Investing Tips

Investing in stocks, Personal finance—Alan Cleaver (Flickr.com)

1) Develop Realistic Goals – The first thing that you should do is to consider what you are hoping to get out of your investment. No matter what you read, the odds of investing $1000 and becoming a mult-imillionaire in less than a year are probably worse than winning the lottery. But, you should think about how much money you can afford to invest (it is better to start off with a small investment at first) and what kind of return you would ideally like to see on it in a given period of time. Still, since this is your first time investing, be sure to keep your goals realistic so as not to end up disappointed and discouraged. Investing in the stock market is a way of growing your money over time not a get rich quick scheme.

2) Research Stocks – Next, you should begin to do some research into which stocks are doing well on the market right now. However, it is important not to just look at current trends of each stock, but to go back in their histories and see how each did in the past. This can help you to get a better idea of whether they are going to be a wise investment in the future, or if you are going to end up losing money on them.

3) Use Your Expertise – Even if you are not an expert on the stock market, using your own personal experience and expertise with a particular company or brand on the stock market can be useful. If you and everyone you know loves a particular product you might want to look into the company that makes it. On the other hand, if you hate a particular product you might be best to avoid the company even if you hear that the company is doing well. But remember most companies these days are multinational and handle thousands of products so the impact of a single product is limited. Another way to use your expertise is to look at the industry that you are currently working in. For instance, if you are in the Information Technology (IT) field you know which software other IT pros like and which they don’t and you also know which vendors your company is using, etc., there is nothing wrong with using that information. (If on the other hand you are an executive at a big company and you have information not yet available to the general public… that is called insider trading and can get you in trouble).

4) Buy Diverse Stocks – It is important not to invest all of your money in one stock. For this reason, instead of buying 1000 shares of one stock, it is almost always better to buy, say, ten different stocks at 100 shares apiece. By diversifying, you will have a better chance of success in the long run and could see a much larger return on your investment. If you only have a small amount to invest you can get instant diversification by buying Mutual Funds which are groups of Stocks often grouped by category or investment objective but also can be equivalent to holding all the stocks in a certain index. Another form of diversification is diversification over time. If you invest a fixed dollar amount every month you will end up buying more shares when the price is low and fewer shares when the price is high, thus lowering your average cost. This is called “Dollar Cost Averaging”.

5) Keep Track – Be sure to watch your stocks closely and consider using trading software as you become more experienced with the stock market. This could help you to come up with projections for your stocks and figure out when they are worth buying or selling. Overall, keeping track of your stocks on a daily basis is a good way to know how they are doing and avoid surprises down the road.

6) Don’t Panic – Almost certainly, there will be times when your stocks will fall at least a few points, no stock goes straight up from the moment you buy it. In times like these, a lot of investors who are new to the game will immediately want to sell them off. However, the truth is that it is almost always best to hold on to your stocks for at least a couple of years (although, this can vary in different circumstances). So even if you see your stocks drop, it is best to give them a chance because they could very well bounce right back! Many experts recommend using a fixed “stop loss” system. Depending on the volatility of the types of stocks you choose it can be anywhere from 10% to 50%. If you are investing in conservative “Blue Chip” stocks and they lose 10% something is wrong and you should limit your losses. For more volatile stocks like those commonly listed on the NASDAQ index you might consider a 20% or 25% stop loss. And for highly speculative stocks that move wildly up and down you might consider a 50% stop loss. Although it seems strange to talk about losses, limiting your losses may be the most important factor in creating long term gains in your portfolio.

7) Finding the Right Stocks- Randomly selecting stocks (the dartboard approach) may work when the market is rising rapidly (a rising tide raises all boats) but it doesn’t work in today’s market. Another bad idea is listening to cocktail chatter and buying the current “hot stock”. These days it is important to have a system to select good stocks to invest in with the potential to rise. One system to consider is the system developed by INO. See: Today’s  50 Top Trending Stocks for more information.

Overall, getting into the stock market can be an exciting and rewarding endeavor. And as long as you keep the above tips in mind, you will have the best chances at success. Good luck!

Author Bio

This Guest post is by Christine Kane from internet providers, she is a graduate of Communication and Journalism. She enjoys writing about a wide-variety of subjects for different blogs. She can be reached via email at: Christi.Kane00 @ gmail.com.