Stock Market Investments: How To Stay Safe And Make Money

Stock Market Investments: How To Stay Safe And Make Money

Posted on July 23, 2012 by William Tan in The Smart Investor

There are many hurdles to be overcome for investors in the stock market, even if they have been involved for years. Although you have potential of making some money, you could experience misfortunes that set you back. When you implement what you?ve learned from this article, you?ll make smart, profitable decisions.

Understand how to locate risks. When you invest, you are inviting risk into your life. For the most part, bonds have a small amount of risk, while mutual funds and stocks have a higher risk factor. There is a risk to every investment. When you are able to identify and calculate the risk associated with each investment, you can start to make wise trading decisions.

For beginners, it is best to adopt a simple and straightforward investment strategy. It can be tempting to diversify right away and try everything you have read about or learned, but if you are new at investing it is best to find one thing that works and stick with that. This will save you cash in the long term.

Choosing a strategy and seeing it through is the best way to invest. To do so, look for stocks that are not in high demand. Find value in those under-appreciated companies. Companies that everyone knows about sell for very high. There is no way to make money on those stocks. By finding little-known companies with good earnings, you can often find diamonds in the rough.

Remember you are buying ownership when you buy stocks. Don?t just buy a good stock, instead buy stock in a good company. Therefore, you should always research the company fully before you purchase a stock, so that you can be sure that your investment is a wise one.

Growth Stocks

Finding stocks that perform at growth rates just a bit better that average is a good guideline. They tend to have more reasonable prices for their value compared to high-growth stocks. High-growth stocks are typically very popular and are therefore expensive; they can?t meet the raised expectations of investors that are very interested in returns.

If you achieve success with a particular business, there?s a good chance it will happen again. This also holds true for bad surprises. So, you need to remember the potential for both developments to unfold when you make investment decisions. There is usually a chain reaction when one event takes place.

It?s very important that you select an industry that you have some familiarity with. If you are extremely knowledgeable about an industry, you are in a better position to view it. If you lack knowledge, and are ill-informed on the market, you will never make any money.

Take your time to understand your rights before signing on with a broker or investment manager. Not just entry fees, but commissions, selling fees, and anything else they charge. These fees can take a significant chunk out of your profits over time.

When analyzing a stock, look at its value, not its price. Are you going to be investing in a long-term stock? A low price might actually be an indication of a great time to buy, but deciding whether or not it is should be based on research. Never buy low price stocks that you aren?t sure about.

Start your investing career with larger companies that have more secure investment options. In a lot of cases, investing in large companies is relatively safe and helps you build a solid portfolio. Then, as you get your bearings, branch out into riskier stocks. Keep in mind that smaller companies have potential to provide fast growth, especially when these companies are considered to be hot. However, at the same time, these companies possess a higher loss risk.

Stock Market

Do not approach the stock market thinking that you will get rich overnight. To do well in the stock market, you must first learn about the market. Expect to make some mistakes, but be sure to learn from them. If you expect the money to start rolling in instantly, you will inevitably be let down.

The projected return and price to earning relationship are the first things to consider when evaluating a stock you want to acquire for your portfolio. Ideally, the price-to-earnings ratio will be no more than two times the projected return. If you?re looking at a particular stock that has a ten percent projected return, then the ratio of price to earnings must not be more than 20.

Set your sights on stocks that produce more than the historical 10% average, which an index fund can just as easily supply. Estimating your stock?s likely return is as simple as locating the growth rate?s projected earnings and then adding that to the dividend yield. If your stock yields 3% and also has 10% earnings growth, expect somewhere around a 13% overall return.

As you read in this article, you can do many things to keep your money safe when investing in stocks. Rather than taking chances, integrate the information here into your trading strategies to increase the probability of earning a good return on your investments.

Source: http://www.compoundedknowledge.com/stock-market-investments-how-to-stay-safe-and-make-money-3/

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