The advent of technology and automation has spread their wings
in every sphere. Similarly in the field of stock market it has
left a deep impact. The "open out-cry system" that prevailed few
years ago in the security market has been replaced by computerized
broking system. The brokers are the middlemen between the customers
and the stock exchange.
The question may arise that what is the source of revenue for the
brokers? The answer is simple one - the brokers earn their bread
through charging commissions on every transaction passed through them.
Such commission is better known as "brokerage". It is charged against
the service that a broker renders to its customers. However, in this
respect it should be borne in mind that brokers of
Indian Stock Market
often provide advisory services, regarding how to invest and where
to invest, but hardly charge for that.
This was all about a brief introduction of a broking firm; now the most
important question that crops up is how to choose a stockbroker? To play
safe in the market, you should get hold of a broking firm keeping the
following guidelines in mind.
SEBI Registration: The very first thing that you should look
for while choosing a stock broker is whether it is registered under
the Securities and Exchange Board of India(SEBI).
If the Broker is registered under SEBI, then it remains accountable to
you at every point of time. If you, ever, face any difficulties with
a particular broker then you can directly intimate such to the
regulatory authority, SEBI.
Self Planning: The next important thing that you should keep
in mind is your investment goals and the kind of services you are
looking for. Different brokers offer varieties of services, which
may not match with your need. Thus, before going for a stockbroker,
go through their service details.
Broker's Objectives: You should also remember to make a
thorough inquiry about the investment philosophy of a particular
broker that you choose and its procedure to handle clients.
Types of Brokers:There are mainly two types of brokers;
discount brokers and full-service firms. Generally, the discount
brokers often engage themselves in buying and selling with a low
commission rate but hardly render any advice to their customers.
On the other hand, full service brokers have the potential to
operate with you on different investment policies. In such ways you get
the opportunity to implement your plans more effectively and efficiently.
Thus, keeping these two types of brokers in your mind, you need to make a
wise and balanced judgment and go accordingly.
Track Record of Broker:The most effective procedure that
you can initiate while selecting a broker is applying the referral
procedure. In simple word it means, consult your friends and
relatives, who are already registered under a broker, about the
best broker that you can go for. Always ask your broker to provide with few
names of the clients they are dealing with, having the same background and
investment plans as you have.
Tuesday, November 6, 2007
The Ultimate Stock Trading Tip - Myth or Reality?
It is commonly reported that the stock market averages about 10% per year return over the long term (decades). We’ve all heard of the stock market and probably have a general idea of what it is and how it works either from high school economics classes, television financial reports, and the countless film depictions of what happens on the floor of the New York Stock Exchange. As savvy stock market investors know, chasing after the one "hot stock" with the possibility of bringing instant riches is not a wise idea.
So, whilst the Stock Market is your best friend (trust me on this one) - the people who operate it may simply be their own best friend, and from your point of view, any advice you receive from them should be taken with a very large pinch of salt. This is the first in a series of articles about the Stock Market and what it can do for you - if you learn to love it allow it to be your friend.
The key to potential trading success and finding the stock market price for entry that is best for you is having a well-defined goal, the methodology to potentially meet that goal, and the discipline to stick with it. It is interesting and amazing to note that not until Charles Dow started compiling the Dow Jones Industrial and Dow Jones Rail Index and started writing about the stock market a little over a hundred years ago, stock speculation was regarded merely as a game for the rich or as gambling for the brave. Because I started to be cautious about investing as early as April 1998, since I thought that price/earnings ratios for the stock market were perilously high, I was not hurt personally by the "Crash of 2000" and had tried to get my clients into less aggressive and more liquid positions in their investment portfolios.
Even if you do not have large sum of money right now as principle to make really big profit out of value investing, you still want to start value investing early so that you can learn in and out of value investing in your earlier years of investing in the stock market. The nicest thing about value investing is that it will not distract your regular job if you choose not to stare at the stock market frequently in your office. When investing in the stock market, it is essential to have a sound set of rules or a system that has been tested in real time, no back testing or historical testing needed.
You may have heard people refer to “playing” the stock market as if it were all a big game of Monopoly. You must learn entry and exit of the stock market just as the divers in Acapulco have learned the correct moment to jump off the cliff.
What exactly does a stock market formula do? Whilst a stock market education firm's licence does not permit them to give investment advice (personal financial product advice), it is something we are frequently asked to provide. The stock market can be a great investment tool, but many people find themselves unsure of whether or not to invest in the market because they are unfamiliar with some of the more common terms associated with market trading.
Many people are afraid to invest in the stock market because they're afraid that they'll be scammed by a fraudulent stock broker. A stock market analyst is an individual, sometimes as a part of an investment firm, whose job it is to watch the changes in the market and keep track of which stocks and bonds are performing well and which ones aren't. If you find a stock that seems interesting but you aren't sure if it's legitimate, take the time to do a little bit of research on both the company that issued the stock and the performance of the stock in the market.
If you think that you might be interested in hiring a stock market analyst but aren't sure how you would go about doing so, then the information below should help you begin your search. These days, I usually begin my search for stock market gold by scrutinizing a company's fundamentals and choosing the best of the best.
So, whilst the Stock Market is your best friend (trust me on this one) - the people who operate it may simply be their own best friend, and from your point of view, any advice you receive from them should be taken with a very large pinch of salt. This is the first in a series of articles about the Stock Market and what it can do for you - if you learn to love it allow it to be your friend.
The key to potential trading success and finding the stock market price for entry that is best for you is having a well-defined goal, the methodology to potentially meet that goal, and the discipline to stick with it. It is interesting and amazing to note that not until Charles Dow started compiling the Dow Jones Industrial and Dow Jones Rail Index and started writing about the stock market a little over a hundred years ago, stock speculation was regarded merely as a game for the rich or as gambling for the brave. Because I started to be cautious about investing as early as April 1998, since I thought that price/earnings ratios for the stock market were perilously high, I was not hurt personally by the "Crash of 2000" and had tried to get my clients into less aggressive and more liquid positions in their investment portfolios.
Even if you do not have large sum of money right now as principle to make really big profit out of value investing, you still want to start value investing early so that you can learn in and out of value investing in your earlier years of investing in the stock market. The nicest thing about value investing is that it will not distract your regular job if you choose not to stare at the stock market frequently in your office. When investing in the stock market, it is essential to have a sound set of rules or a system that has been tested in real time, no back testing or historical testing needed.
You may have heard people refer to “playing” the stock market as if it were all a big game of Monopoly. You must learn entry and exit of the stock market just as the divers in Acapulco have learned the correct moment to jump off the cliff.
What exactly does a stock market formula do? Whilst a stock market education firm's licence does not permit them to give investment advice (personal financial product advice), it is something we are frequently asked to provide. The stock market can be a great investment tool, but many people find themselves unsure of whether or not to invest in the market because they are unfamiliar with some of the more common terms associated with market trading.
Many people are afraid to invest in the stock market because they're afraid that they'll be scammed by a fraudulent stock broker. A stock market analyst is an individual, sometimes as a part of an investment firm, whose job it is to watch the changes in the market and keep track of which stocks and bonds are performing well and which ones aren't. If you find a stock that seems interesting but you aren't sure if it's legitimate, take the time to do a little bit of research on both the company that issued the stock and the performance of the stock in the market.
If you think that you might be interested in hiring a stock market analyst but aren't sure how you would go about doing so, then the information below should help you begin your search. These days, I usually begin my search for stock market gold by scrutinizing a company's fundamentals and choosing the best of the best.
4 Major Stock Investing Mistakes
When it comes to investing, I can promise you one thing: you will make mistakes. Ask any experienced investor, and he’ll admit some major failures as well. You’d better get mentally prepared for it. Having said that, there are a few mistakes any new investor seems to make. I’m happy to show you the four most common mistakes made by newbie’s and how to avoid them. Buckle up - here we go.
Mistake #1 - Start too late
You are never too young to start investing in the stock exchange. Get started as soon as humanly possible.
The perception of investing is that it’s limited to grey haired, financially established men (not women!) who can invest great amounts of money. This is a major misconception. And even worse: it’s limiting people (you?) from exploiting the power of making your money grow and grow and grow. Start today. Now.
Why such a hurry? Waiting to start investing will make an immense difference in your financial destiny. Want proof? Investing $2000 a year (that’s barely $170 a month) starting at the age of 36 and an ARR (Annual Return Rate) of 10% can yield $802,895 at the age of 75. Nice amount of money right? Well, it could have been better. Much better. If you had started at the age of 26, that same investment would have resulted in a return of $2,114,379.
Let me do the math for you: the same investment, with the same ARR but with a 1.3 MILLION dollar difference…
Not able to invest as much as $160 a month? Set aside $100. Or even $25. Believe me: even this small amount can have a large impact in the long run.
Ready for Mistake #2? Here we go. It’s a fundamental mistake made by the overwhelming majority of new investors. Promise me one thing. After you’ve read this article, ask yourself this question: would I have made this mistake? Be honest. I’ll give you my answer before you even know the question: yes, I made that mistake as well. Ready?
Mistake #2 - Not Understanding The Company
It’s shocking! Most people will put more time, energy and research into buying a blender than they will in buying stocks. Of course, they take a quick look at what the stock price is doing, but there it stops. It is however imperative that you take the time to interpret the financial history of the companies you wish to participate in by buying shares. It’s important that you can explain what you are buying, why you are buying and how it will benefit you in the long run.
Having said that, it’s also crucial to stay objective while selecting stocks. Forget the story about the monkeys who are outperforming investment pro’s. In the long run (and that’s what you are after) the pro’s will always come out on top. It’s almost a law of nature: stocks that you’ve researched well and carefully selected are more likely to do better than stocks you choose based on a feeling. So put your emotions aside and consider your options carefully. Like Nike? By their shoes, but not necessarily Nike shares.
Another poor judgment issue - let’s say it’s Major Mistake #2a.
When choosing a financial coach or advisor, also take time to research and investigate. Consider meeting with a couple of candidates. Talk to them about their approach to investing. See if they understand what you’re looking for. And one last tip: if you are meeting with someone on a recommendation, make sure that the person who recommended the advisor is someone who’s qualified to do so. How? Just ask how his shares are doing…
Ok, Mistake #3. You’ve probably heard this a gazillion times before. And for a very good reason. It’s a recipe for disaster. And it is also one of the most neglected and violated rules of investing. Why? Not because investors are stupid, but because they are either lazy or greedy. Or both…
Mistake #3 - Putting All Your Eggs In One Basket
Don’t underestimate this old adage. In any portfolio, you will want to diversify your holdings. Spread your money not only over several different companies but also over different industries.
Why people ignore this rule? Most common reason is laziness. Let’s face it, its harder to find four promising companies than one. It’s harder to find three industries with an upbeat future than one. It takes work to built a diversified portfolio. Most people hate work. They’re after the lazy dollars.
Another reason why most investors have a very thin focus is good old fashioned greed. Suppose you have a portfolio with say five different stocks. One is slow. Three are doing ok. One is making you a small fortune. What do you do next? Sell the slow and average performing shares and invest your dollars in number five? Or do you believe in your initial game plan and stick to it? The fact is that most investors fall for the low hanging fruit – not seldom to find it was already harvested and the rally didn’t last. What they end up with, is a few eggs in a very expensive basket…
Saved the best for last. Major Mistake #4. But… you will probably not like this closing part. It undermines the reason most people (you?) start to invest in the first place. But please, please, please take my advice. It will save you from big disappointments and maybe even from going bankrupt.
Wow.. THAT serious? Yes, THAT serious! Get ready for a reality check.
Mistake #4 - Confusing Wall Street for Las Vegas
I guess I do not have to explain the fundamental differences between Wall Street and Las Vegas. But since you are fully aware of that difference, then why the [censored] do you (Oh no, not you of course, just those other guys) keep confusing gambling and speculating with investing?
Investing in stocks is part of a long-term financial game plan (game – bad choice of words by the way!) and not a get-rich-quick scheme. Day trading for example, has nothing (nothing!) to do with investing. Sure, you can make good money from it – when you know what you are doing and threat it like a J*O*B.
Sure, living the fast lane can be fun. And extremely profitable. But don’t ever say your are ‘investing’ your money. Your speculating. Gambling. If you feel attracted to it, set apart some ‘gambling money’ and make sure you can afford to lose it up to the last penny. Or don’t even bother and go to Las Vegas straight away to have some fun.
Mistake #1 - Start too late
You are never too young to start investing in the stock exchange. Get started as soon as humanly possible.
The perception of investing is that it’s limited to grey haired, financially established men (not women!) who can invest great amounts of money. This is a major misconception. And even worse: it’s limiting people (you?) from exploiting the power of making your money grow and grow and grow. Start today. Now.
Why such a hurry? Waiting to start investing will make an immense difference in your financial destiny. Want proof? Investing $2000 a year (that’s barely $170 a month) starting at the age of 36 and an ARR (Annual Return Rate) of 10% can yield $802,895 at the age of 75. Nice amount of money right? Well, it could have been better. Much better. If you had started at the age of 26, that same investment would have resulted in a return of $2,114,379.
Let me do the math for you: the same investment, with the same ARR but with a 1.3 MILLION dollar difference…
Not able to invest as much as $160 a month? Set aside $100. Or even $25. Believe me: even this small amount can have a large impact in the long run.
Ready for Mistake #2? Here we go. It’s a fundamental mistake made by the overwhelming majority of new investors. Promise me one thing. After you’ve read this article, ask yourself this question: would I have made this mistake? Be honest. I’ll give you my answer before you even know the question: yes, I made that mistake as well. Ready?
Mistake #2 - Not Understanding The Company
It’s shocking! Most people will put more time, energy and research into buying a blender than they will in buying stocks. Of course, they take a quick look at what the stock price is doing, but there it stops. It is however imperative that you take the time to interpret the financial history of the companies you wish to participate in by buying shares. It’s important that you can explain what you are buying, why you are buying and how it will benefit you in the long run.
Having said that, it’s also crucial to stay objective while selecting stocks. Forget the story about the monkeys who are outperforming investment pro’s. In the long run (and that’s what you are after) the pro’s will always come out on top. It’s almost a law of nature: stocks that you’ve researched well and carefully selected are more likely to do better than stocks you choose based on a feeling. So put your emotions aside and consider your options carefully. Like Nike? By their shoes, but not necessarily Nike shares.
Another poor judgment issue - let’s say it’s Major Mistake #2a.
When choosing a financial coach or advisor, also take time to research and investigate. Consider meeting with a couple of candidates. Talk to them about their approach to investing. See if they understand what you’re looking for. And one last tip: if you are meeting with someone on a recommendation, make sure that the person who recommended the advisor is someone who’s qualified to do so. How? Just ask how his shares are doing…
Ok, Mistake #3. You’ve probably heard this a gazillion times before. And for a very good reason. It’s a recipe for disaster. And it is also one of the most neglected and violated rules of investing. Why? Not because investors are stupid, but because they are either lazy or greedy. Or both…
Mistake #3 - Putting All Your Eggs In One Basket
Don’t underestimate this old adage. In any portfolio, you will want to diversify your holdings. Spread your money not only over several different companies but also over different industries.
Why people ignore this rule? Most common reason is laziness. Let’s face it, its harder to find four promising companies than one. It’s harder to find three industries with an upbeat future than one. It takes work to built a diversified portfolio. Most people hate work. They’re after the lazy dollars.
Another reason why most investors have a very thin focus is good old fashioned greed. Suppose you have a portfolio with say five different stocks. One is slow. Three are doing ok. One is making you a small fortune. What do you do next? Sell the slow and average performing shares and invest your dollars in number five? Or do you believe in your initial game plan and stick to it? The fact is that most investors fall for the low hanging fruit – not seldom to find it was already harvested and the rally didn’t last. What they end up with, is a few eggs in a very expensive basket…
Saved the best for last. Major Mistake #4. But… you will probably not like this closing part. It undermines the reason most people (you?) start to invest in the first place. But please, please, please take my advice. It will save you from big disappointments and maybe even from going bankrupt.
Wow.. THAT serious? Yes, THAT serious! Get ready for a reality check.
Mistake #4 - Confusing Wall Street for Las Vegas
I guess I do not have to explain the fundamental differences between Wall Street and Las Vegas. But since you are fully aware of that difference, then why the [censored] do you (Oh no, not you of course, just those other guys) keep confusing gambling and speculating with investing?
Investing in stocks is part of a long-term financial game plan (game – bad choice of words by the way!) and not a get-rich-quick scheme. Day trading for example, has nothing (nothing!) to do with investing. Sure, you can make good money from it – when you know what you are doing and threat it like a J*O*B.
Sure, living the fast lane can be fun. And extremely profitable. But don’t ever say your are ‘investing’ your money. Your speculating. Gambling. If you feel attracted to it, set apart some ‘gambling money’ and make sure you can afford to lose it up to the last penny. Or don’t even bother and go to Las Vegas straight away to have some fun.
Stock Market Basics
Stock markets represent and portray the commercial and economical strength of a country. The economy of a country relies on the stock market to a great extent, since they trade in the stocks of major companies. These markets are the source of capitalism in the United States. They play an important role by raising funds for companies. Being a part of a stock exchange may seem complex to many, but you can be a part of any popular stock exchange, either with the help of a brokerage account that can be opened online, or by interacting directly with the exchange.
A stock market is a place where people who want to earn money through investment, and companies who can provide those investment opportunities, come together. The trading and investing of stocks takes place in this market. Companies need funds and in order to raise funds, they issue stocks in the form of shares in which you invest, to earn money. If the company earns profit, then you as a stockholder of that company will also get a share in that profit.
You can gain a lot on the selling floor of a stock market. It is necessary, however, for you to understand the basics of a stock market, what its roles are, and how it works. For this, a proper study of all the possible market moves is essential. This needs constant appraisal, as the market moves very fast, and there are many ups and downs involved.
Stock markets are fraught with risk. Therefore, be it trading or investing, you need to proceed with caution. It is advisable to analyze a company’s profits and cash flow, the services it offers and the profit distribution pattern it follows, before investing in its stocks. If you are confident that the shares are commercially viable, you can go ahead and make an investment.
.
Beside the profit incurred through the sale and purchase of stocks, you can also get the benefit of dividends that profitable companies offer. As an investor, you ought to know that blue chip stocks, income stocks, defensive stocks and growth stocks are several groups under which the future shares of companies are divided.
Big companies that pay dividends without fail, and have a record of growth in profit, have their shares referred to as blue chips. You can also invest in income stocks because the companies that issue these stocks pay high dividends, and have a stable earning in the market. Growth stocks grow very fast, but may fetch you nil or minimal dividends. In order to minimize your risk you can invest in defensive stocks as their value remains constant even if the market falls.
Companies can also issue their shares abroad with the help of banks. If you are planning on investing in stocks then try to invest in companies that offer dividends along with discounts. You can do the purchasing through the brokerage, or dividends, or a direct investment plan. Since a lot of people buy shares and stocks there is a cycle of supply and demand. Depending on this cycle, various fluctuations take place in the stock market. So, try to immunize yourself from these fluctuations by investing wisely.
The stock market not only provides you, as a trader or investor, an opportunity to purchase or sell shares or stocks, but also plays an important role in maintaining the cash flow in the economy of a country. If you are interested in making money in stocks, then it is recommended you learn the basics of stock markets before leaping in.
A stock market is a place where people who want to earn money through investment, and companies who can provide those investment opportunities, come together. The trading and investing of stocks takes place in this market. Companies need funds and in order to raise funds, they issue stocks in the form of shares in which you invest, to earn money. If the company earns profit, then you as a stockholder of that company will also get a share in that profit.
You can gain a lot on the selling floor of a stock market. It is necessary, however, for you to understand the basics of a stock market, what its roles are, and how it works. For this, a proper study of all the possible market moves is essential. This needs constant appraisal, as the market moves very fast, and there are many ups and downs involved.
Stock markets are fraught with risk. Therefore, be it trading or investing, you need to proceed with caution. It is advisable to analyze a company’s profits and cash flow, the services it offers and the profit distribution pattern it follows, before investing in its stocks. If you are confident that the shares are commercially viable, you can go ahead and make an investment.
.
Beside the profit incurred through the sale and purchase of stocks, you can also get the benefit of dividends that profitable companies offer. As an investor, you ought to know that blue chip stocks, income stocks, defensive stocks and growth stocks are several groups under which the future shares of companies are divided.
Big companies that pay dividends without fail, and have a record of growth in profit, have their shares referred to as blue chips. You can also invest in income stocks because the companies that issue these stocks pay high dividends, and have a stable earning in the market. Growth stocks grow very fast, but may fetch you nil or minimal dividends. In order to minimize your risk you can invest in defensive stocks as their value remains constant even if the market falls.
Companies can also issue their shares abroad with the help of banks. If you are planning on investing in stocks then try to invest in companies that offer dividends along with discounts. You can do the purchasing through the brokerage, or dividends, or a direct investment plan. Since a lot of people buy shares and stocks there is a cycle of supply and demand. Depending on this cycle, various fluctuations take place in the stock market. So, try to immunize yourself from these fluctuations by investing wisely.
The stock market not only provides you, as a trader or investor, an opportunity to purchase or sell shares or stocks, but also plays an important role in maintaining the cash flow in the economy of a country. If you are interested in making money in stocks, then it is recommended you learn the basics of stock markets before leaping in.
Stocks - Getting Started in the Market
Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-trading, devious power brokers making back room deals; it all makes for great drama. Then you have the true-to-life stock market stories in the news: insider trading, big money IPOs, the dot com bust. All of it is enough to make you steer clear of the market for good and travel down a safer investment path. But don’t be frightened, history shows that long-term, there’s no better place to put your money to watch it grow. Here are a few tips to get you started.
Stocks 101
Simply put, when you purchase stock in a company, you become part-owner of that company. Along with other shareholders, you all combine as investors in the business, and therefore reap its rewards, or suffer its losses. Stocks are most commonly divided into separate categories depending on the size and type of the company (e.g., mid-cap, small-cap, energy, tech, etc.).
While speculation can drive stock prices in the short term, it’s long-term company earnings that determine a stocks gains or losses. Speaking of short term, that’s when stocks are extremely volatile. Over a span of just a few months or years, stocks can climb to astronomic heights or drop to pitiful lows. But, since 1926, the average stock has returned over 10 percent per year. That’s better than any other investment vehicle out there, and that’s why stocks are your best bet for long-term investment.
Picking Stocks
Before you dive head-first into the market, there are a few things you should know about picking stocks. First, the market’s performance as a whole is not necessarily a reflection of its individual stocks. Good stocks can keep growing even in a down market, while bad stocks have the frustrating tendency to drop or remain stagnant in a strong market.
Also, remember that history is not indicative of a stock’s future performance. Even solid stocks can slip from time to time. Remember that stock prices are based on a company’s earnings outlook, not its past performance. If the future looks bright for a company, a $100 dollar stock is probably a good buy. If earnings look less than promising, even a $5 stock can be a waste. Finally, investors determine a stock’s value by measuring a handful of primary criteria, most notably cash flow, earnings, and revenue.
“Diversify”
It’s the rallying cry of all smart investors. When compiling an investment portfolio of stocks, it’s smart to own shares in companies from several different industries. Consider it a “hedge bet”. When one part of the economy experiences a downturn, you’ll have other stocks in your portfolio to put your faith in.
When building your portfolio, the safest bet is to pick from financially strong businesses with earnings growth above the average. Surprisingly, that limits the lot to choose from, as only around 200 stocks today fit that bill. A solid portfolio features somewhere in the ballpark of 20 stocks selected from seven or more industries. A general rule of thumb is to invest in stocks with an above-average rate of growth and reasonable valuations.
Buy and Hold
Day trading is a great way to lose your nest egg, but quick. As we noted before, stocks over the short term are highly volatile. Sure, brokers today are offering cheap trades, but beware. There are a ton of hidden fees and taxes involved with day trading, not to mention the amount of attention required by you to monitor the blow-by-blow proceedings of the market. Our recommendation: buy and hold. A ten percent return over the long term is nothing to sneer at.
Stocks 101
Simply put, when you purchase stock in a company, you become part-owner of that company. Along with other shareholders, you all combine as investors in the business, and therefore reap its rewards, or suffer its losses. Stocks are most commonly divided into separate categories depending on the size and type of the company (e.g., mid-cap, small-cap, energy, tech, etc.).
While speculation can drive stock prices in the short term, it’s long-term company earnings that determine a stocks gains or losses. Speaking of short term, that’s when stocks are extremely volatile. Over a span of just a few months or years, stocks can climb to astronomic heights or drop to pitiful lows. But, since 1926, the average stock has returned over 10 percent per year. That’s better than any other investment vehicle out there, and that’s why stocks are your best bet for long-term investment.
Picking Stocks
Before you dive head-first into the market, there are a few things you should know about picking stocks. First, the market’s performance as a whole is not necessarily a reflection of its individual stocks. Good stocks can keep growing even in a down market, while bad stocks have the frustrating tendency to drop or remain stagnant in a strong market.
Also, remember that history is not indicative of a stock’s future performance. Even solid stocks can slip from time to time. Remember that stock prices are based on a company’s earnings outlook, not its past performance. If the future looks bright for a company, a $100 dollar stock is probably a good buy. If earnings look less than promising, even a $5 stock can be a waste. Finally, investors determine a stock’s value by measuring a handful of primary criteria, most notably cash flow, earnings, and revenue.
“Diversify”
It’s the rallying cry of all smart investors. When compiling an investment portfolio of stocks, it’s smart to own shares in companies from several different industries. Consider it a “hedge bet”. When one part of the economy experiences a downturn, you’ll have other stocks in your portfolio to put your faith in.
When building your portfolio, the safest bet is to pick from financially strong businesses with earnings growth above the average. Surprisingly, that limits the lot to choose from, as only around 200 stocks today fit that bill. A solid portfolio features somewhere in the ballpark of 20 stocks selected from seven or more industries. A general rule of thumb is to invest in stocks with an above-average rate of growth and reasonable valuations.
Buy and Hold
Day trading is a great way to lose your nest egg, but quick. As we noted before, stocks over the short term are highly volatile. Sure, brokers today are offering cheap trades, but beware. There are a ton of hidden fees and taxes involved with day trading, not to mention the amount of attention required by you to monitor the blow-by-blow proceedings of the market. Our recommendation: buy and hold. A ten percent return over the long term is nothing to sneer at.
Subscribe to:
Posts (Atom)
