For illustration purposes, lets assume I have just invited you over for dinner. Assuming you accepted the invitation, one of the first questions your would ask is “How do I get there? “ The same applies to beginner investors. Every investor was at one time a beginner investor. The investors who reach the finish line with a nest egg had a plan to get there.

Lets get back to dinner. I live in Florida. You live in California. That would not provide enough information for your arrival. You have a starting place and a destination, but what about the plan to get to dinner? You would need to know specifics. The same applies to investing. You would prepare for the journey, chart a course and arrive safely in Florida as you would with your investment goals.
The same principle applies to beginner stock market investing. Lets assume you have $10,000.00 to invest right now. So how do you prepare?

Understand How The Stock Market Works

Individual investors should start right here. What makes a stock price move? Hint: it is not individual investors. Institutional investors, such as mutual funds, and banks, move stock prices up and down. Simple supply and demand I the order of the day. Institutions make a living buying and selling stocks. Following along with how institutions trade is a good place to start. Understand your 1000 shares of XYZ are not going to move the stock price.

Defining Yourself as An Investor

My personal stop loss point is 6%. Why is that? Because I do not like the way it feels losing 10% or even 7%. This is a hard and fast rule for me. I remember following a stock once down to a 20% loss thinking all the while it would come back. It did not. The point is I know myself, and I know my rules. They are non-negotiable factors for me with investing in the stock market.

Where Are You Now As an Investor?

Every journey begins with a starting point. Every journey has a destination point. Everything you do in between will either define your success or document your failure. Set your goals; practice your strategy with paper trading stocks. Set aside capital for short term investing. Plan to include long-term investments. Open a money market account for safely keeping your cash. If you want to trade options, first learn how to trade options . Determine your plan and then work your plan. Dinner is at 6

The market reacts to every bit of economic news that’s hits the news wires. It always has it always will. Fortunes have been made off both positive and negative results. Are you a trader or an investor? Swing traders actually can flourish in markets like these. Their positions are usually tied to news, and enter and exit stocks on a short-term basis, from a few days to a few weeks. Swing traders watch for technical and fundamental analysis in determining their strategies, bent more towards technical signals.

However the investor uses a different tact. Their decisions are based on the fundamentals of the company. 90% of all stocks follow the market regardless of how good stock fundamentals are. This is where your own strategy comes into play. Determining who you are as an investor well in advance of trading the stock market is a key factor in determining your success as an investor.

We were recently asked a question. A woman stated she had lost 35% on paper with her investments recently. “What should I do?” We cannot answer that question for her, nor can anyone else. You will never be able to buy any stock at its absolute bottom, nor will you be able to determine the absolute top when selling. That’s simple fact is as much a part of investing in the stock market as any other rule you may apply.

Preservation of capital should be your number one priority with investing. Your pre-determined rules for trading stocks should be the rules you follow. The real question is do you have rules that you follow. Frankly most do not, and that is why most people lose money in a market correction.

No matter what type of investor you are, or how long you have been investing your money, invariably you have probably made some mistakes along the way, perhaps even some costly mistakes. But, first and foremost, one of the biggest mistakes people tend to make is to not invest at all.  Do you want to make your money work for you?  You can!  Even if all you can spare is a few dollars a week, now is the time to commit to doing so.  You’d be amazed at how much money you could put aside to invest if you were to really get creative and analyze your monthly outlay with new frugal vision.  As with any decision, what it really boils down to is a choice.  You too, can make a choice to start investing today.

While choosing not to invest and delaying and postponing investment into your financial future are two of the biggest mistakes many people make, investing before you are in the financial position to do so is another rudimentary problem.  Before you begin investing you will want to ensure that your financial situation is in order first.  Get your credit cleaned up first.  Start by paying off high interest loans and credit debts you may be carrying, then set aside at least three months of living expenses in savings and don’t touch it.  Make that your emergency fund should you find yourself unemployed or unable to work for an extended period of time due to an emergency medical situation.  Once you have your financial house in order, you will be ready to begin letting your money work for you with a sound investment strategy.

That brings me to another common mistake people make when they invest.  Don’t invest to get rich quick.  Let’s face it; we have all heard the Cinderella stories of investors who were in the right place at the right time with the right amount of cash that turned an obscure, risky opportunity into one of the most astounding investments in their financial portfolio. How may Cinderella’s do you know?  That’s what I thought, me too, not a one!  But I do know many who equipped themselves with the knowledge they needed to invest based on their particular financial goals and situations that have capitalized on the opportunities that do exist in today’s financial markets.   If you are going to invest to get rich quick, you will likely loose most if not all of your investment.

Next, don’t put all your eggs in one basket.  Depending on your financial situation spread out your investment strategy to incorporate various types of investment for the best possible return.  As you gain more knowledge, experience, investment savvy and capitol within your portfolio, the more opportunities you have to diversify and capitalize on investments that are risky which may prove to be highly lucrative.  Again, it will depend a lot on your particular investment style.

For the beginning investor or the seasoned stiock picker , consistency, strategy, and long term planning will help you to achieve your financial goals. So make the commitment and judiciously embark upon your journey to financial security today!

We have talked about defining yourself as an investor . Depending on what kind of investor you are, there are, for the most part, three different types of investments or categories within which you can invest.  Essentially they include stocks, bonds, and cash.  Seems pretty simple, right?  Well, it certainly is not.  My advice is to proceed with caution, investing as in any other technique you develop to accomplish a specific purpose, especially one of achieving financial freedom or amassing significant wealth, can easily become very complex and risky. But, a lot can be accomplished by educating yourself, expanding your knowledge and understanding through solid research, and last but not least, by learning from your mistakes and continually honing and refining your strategy and system.

Fortunately, the amount of information and knowledge that you’ll need to equip yourself with is directly associated with the sort of investor you are.  As there are basically three types of investments as stated above, there are also primarily three types of investors.  They include the conservative, moderate, and aggressive.  And as with the varying combinations of investments your can make within the financial markets, there are also a broad spectrum of each type of investor within each of the three basics.

The conservative investor is often an investor who may be a bit older and have less time to play their hand in the financial markets before retirement.  They may also just be conservative by nature and not readily willing to part with their hard earned dollar and seek to achieve low but consistent returns on their investments.  They tend to place their money in interest bearing savings or money market accounts, Treasury bills, or Certificates of Deposit.  These investments are representative of the safest investments as they are low risk and grow over a long period of time.

Moderate investors tend to be a little younger than the conservative investor and likely have a bit more time to accomplish their specific financial goals.  They tend to be somewhat more diverse than the conservative investor and invest in cash, bonds and may dabble in the stock market.  Moderate investing is a cadre of low to moderate risk investment within the cash and bond market and may also include investments in real estate, providing the investment is of relatively low risk.

Aggressive investors tend to be young and commonly do most of their investing in the stock and financial markets within specialized, highly unpredictable sectors and may even invest significant portions of their portfolio in foreign markets. All can be highly volatile and extremely risky; however, these investments tend to be the ones that provide the greatest, sometimes even astounding, returns on investment.

Before you begin investing your hard earned money, it’s important to clearly analyze and understand your particular financial position and consider what your goals are.  You want to ensure that you possess a thorough understanding of your investment style and strategy and develop a plan that fits within that framework.  Lastly, knowledge is power.  The more you know and understand about the particular investments and their associated risks, the better off you will be when it comes to meeting your long range financial goals.

Defining what kind if investor you are is not really hard if you apply some basic principles and answer simple questions about yourself. These questions should be answered honestly and the only one who could be hurt here for shading the truth is you. Investing is not gambling, although many satisfy their gambling urges with the stock market. More on that later

How old are you? Seems simple, but it is important. The 25-year-old female college graduate can assume more risk in her portfolio simple because she has more productive years of work left than the 45 year old administrative assistant.

What are you investing goals? This one is not quite so simple. Most people would say their goals are to make money with investing. Fair enough, but you need to get more specific. Are you investing for retirement? Are you investing for your children’s education?

Imagine that you had 10,000.00 to invest in the stock market. Would your priority be watching that money grow slowly over time while limiting your risk? Or perhaps you want your money to grow quickly and assuming risk to accomplish your goals doesn’t bother you at all. The first example would be defined as a conservative investor, the second a more aggressive investor. Most people fall somewhere in between the two.

Risk and reward apples to everyone who invest money in the stock market. The stock market shows no partiality in either rewarding or relieving someone of their money. Defining who you are as investor will help you make better decisions when choosing your investments