If you were a beginner in stock market investing, the first and the best step would be to educate yourself about the various aspects of stock investing. You can get a lot of information at free of cost if you log on to the Internet. There are numerous websites, which are either owned by the stock brokers or voluntary organizations that provide all the preliminary and advanced information about investing in stock market.
You must acquire some quantum of theoretical knowledge about stock analysis both at fundamental and technical levels.
“Fundamental analysis is the process of looking at a business at the basic or fundamental level in finance.” Fundamental analysis involves the understanding of how much money a company is presently making and what are its future prospects.
Fundamental analysis also involves understanding the income and financial statements of the company whose shares you intend to buy. It helps you understand its management and competitive advantages with the help of historical and present data.
Technical analysis studies the supply and demand position of a stock in a market in an attempt to determine its direction and future trend. “In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor.”
It must, however, be understood that no amount of theoretical knowledge is going to make you successful in any field including stock investing. You need practical, hands on experience in any job that you take up.
You need to be cautious stock investor in the beginning. Stock market investment is a risky business. The element of risk can be substantially reduced if the investors take informed decision.
Open your stock trading account with a stockbroker who charges low commissions and provides efficient customer support services.
There are stockbrokers, who allow you to invest as low as $1.50 to $3 on equity trades. It would not be painful to risk such small amounts. You earn while you learn form your mistakes, which are bound to occur initially but don’t matter much financially.
You can invest in shares of high value stocks by purchasing fractional shares. You can buy as little as 0.01 shares of a stock. Fractional investments can give you the ultimate flexibility in building your portfolio. There are brokerages that enable you to sell your fractional shares real time for the low commissions. Fractional investments are available through scheduled investment plans.
With scheduled investments, you can build a custom portfolio of stocks and ETFs, set a dollar amount to be invested in the entire portfolio, and create an investment schedule to make one-time or recurring investments in your portfolio automatically.
ETFs are as good as equities. Investments in ETFs involve minimal risks and offer better chances of making sure profits.
You must also try to learn from those who have proved successful in stock investing.
It is said that two of the most successful investors in the history of stock market, Warren Buffet and Peter Lynch used just one trick that helped them set up records of 20% to 30% compounded earnings over long term.
Therefore you must follow this age-old axiom of keeping your investment simple. When you truly understand the implications of such a simple advice, you will find how beneficial it becomes for your portfolio.
Buffet advises the investors to write down a short paragraph mentioning their basic thesis of making investment. The thesis may be somewhat on the lines: “I am buying 10,000 shares of Company XYZ at $25 per share because I believe (insert reason here such as profit will grow twice as fast as the current price-to-earnings ratio, hidden assets are on the balance sheet, there was a management change for the better, valuation is too low, etc.)”
Thereafter keep monitoring the movement of the stock on the basis of your thesis.
A practical result would be that you would be separating chaff from the grains. You must guard yourself against the so-called financial wizards who trot out huge figures about millions of transactions and billions of sales to prove their point to be true.
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Trading and Investing 4U, in preparing this post, did not take into account the investment objectives, financial situation and particular needs of the investor. Before making any decision about the information provided, you must consider the appropriateness of the information having regard to your objectives, financial situation, and needs, and always consult your advisor. Securities and Derivatives have inherent risks and any comments appearing here are general advice only and can involve high risk investment. Trading and Investing 4U has made every effort to ensure the information is accurate, however its accuracy, reliability or completeness is not guaranteed.
Any advice in this post is General Advice only
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