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

Buying Stocks On Hot Tips

Begin buying stocks because someone, a friend, a relative, or a stockbroker gave you a hot tip. Buying stocks is not like buying a lottery ticket, although many people buy stocks the same way. This is gambling and investing should never be confused with gambling. Investing properly require research in the company and research in the market. Failure to do both will guarantee failure, and subsequently lost money.

Buy Stocks Because of Name Recognition

Many people think they are buying stock in huge corporations and that will minimize the risk of losing money. Nothing could be further from the truth. Filings for bankruptcy protection occur everyday and that includes large corporations. When you think to yourself, this company is too big to go out of business, remind yourself of Enron.

Trust your investing decisions with a stranger

As in any business there are unscrupulous individual who prey on unsuspecting victims. Before you hand your resources over to anyone, make sure you have researched their background and their historical performance. Do not rely on their word as the final say. It is likely that you have worked very hard for your money. Saving money is difficult and requires sacrifice in today’s economy. Investing money in the stock market requires that same kind of diligence.

Buying Stocks That Have Recently Fallen in Price

Many beginner investors choose stocks because they are perceived to be cheap. Financial markets often affect stock price. However more often stocks that have fallen out of favor have done so because of the company is not on firm financial ground. Bottom fishing often results is falling further to the bottom. Stocks that have reached new lows more often than not go lower.

Buying Penny Stocks

This is a favored place for beginning investors to begin with investing in stocks. The reasons are simple. Penny stocks are priced right for new investors. Beginner investors are told, 20,000 shares of XYZ can be purchased for pennies per share. The immediately think the stock needs only to appreciate in price a few cents to double their money. The lure of easy money draws then in and frequently the loss of their investments teaches them a lesson. Concentrate on stocks that are proven winners. Leave the speculative stocks to the speculators and train yourself to become an investor.

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.

When considering how much you should invest, one of the first questions you should ask yourself is how much can I afford to invest.  In your deliberations, you should consider factors we have discussed previously, like your current financial situation.

Are you making payments on high interest credit cards or other debts?  Do you have enough money to sustain you for at least three months should you meet with some unforeseen misfortune like a sudden medical illness or finding yourself unemployed?  Do you have a home or other responsibilities that may require some unexpected out of pocket expenses?  These are all things to take into consideration when you set out to determine how much you should to invest

Many first time investors or beginner investors often want to begin by investing their entire savings.  Although for some this may be an option and if it’s true for you, great!  However, you should consider your entire financial situation and keep your investments strategy in line with your long range financial goals.  Think about what your savings was originally for.  This may prompt you to reconsider a full investment from long standing savings.

So, begin by determining how much of your savings should remain in your savings account, and how much can be used for investments. Unless you have income or funds from another source, such as an inheritance, this will quite likely be all that you have available to invest.

Next, determine how much you will be able to add to your future investments. If you are employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time. Most employers offer 401K plans and other savings plans to assist their employees with meeting their financial goals for retirement.  You can also speak with a qualified financial planner who can assist you in setting up a budget and help you determine how much of your future income you should invest to meet your financial goals.

With the educated and knowledgeable assistance of a financial planner, you can be sure that you are not investing more than you can afford – or less than you should in order to achieve your specific investment goals.

As with many types of investments, you can be assured that a certain initial investment will be required.  Research the investments you plan to make and be armed with all the information you can obtain prior to investing your money.  If you don’t have the required initial investment amount, you may need to look for other investment options like best cd rates.  Beginning investors should never borrow money to invest.

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!

Growth Stocks

Stocks are priced according to the value of the companies’ earnings in the perfect world. We do not live in a perfect world. That is an understatement, for sure. Growth stocks are stocks whose earnings are expected to grow at an above average rate relative to the market. Growth stocks don’t usually pay dividends. They prefer to re-invest the company. Generally speaking, one will pay a premium for growth stocks as investors are paying for the future profitability of the company. Growth stock investors don’t mind paying premiums for growing stocks because they believe the increases in earnings will justify the higher valuation.
Growth stocks are more volatile, but produce quicker profit and loss than for example income stocks. It is all about expectations with growth stocks. Growth stocks usually have P/Es of 25 or higher, which reflect those lofty expectations. As long as those expectations are met with earnings the stock will continue to grow and with it your profit potential. Growth stocks usually feature strong growth rates. Lets say you find a company with a PE of 25 and a growth rate of 54%. You may have found a winner here, but these types don’t usually fall into your lap very often. On the other hand lets say you are invested in a growth stock and the company reports less than expected earnings for a quarter. Expected earnings are those that professionals are predicting. One bad report and all you paper profit can be lost or reduced.. Many companies can remain growth stocks for years. Home Depot is a excellent example. I owned several hundred shares of Home Depot in the late 1980’s and it remained a stellar performer for a decade, but all good things come to an end.

Value Stocks

On the other hand values stocks function and trade differently than growth stocks. Value stocks are those with low price-earnings ratios and high projected earnings-growth rates. Value investing has proven to be a successful investment strategy.  These stocks have usually fallen out of favor for some reason. Perhaps a negative earning report or negative company new about the future outlook for earnings. This doesn’t make these stocks bad investments. Value investors want firms that, although going through a rough period, have a solid history of profitability.  As with any commodity, buying at discount to true value is good for the bottom line, in time. Value investors look at value stocks as bargains, like the stock is on sale. Value stocks are often confused for cheap stocks, which they are not. They are undervalued for some reason. A company with a track record for producing profit generally will produce that profit again. When this happens the market, the investors will notice and prices will begin to increase and you will fell all the wiser for spotting this company and buying its shares at a discount when no one else was noticing.

Day Traders

Traders that participate in day trading are called day traders. Day trading is a very risky trading style. Day Trading by definition is the buying and selling of a security within a single trading day. Stocks are never kept overnight because of extreme risk of prices changing to the detriment of the trader. The rewards of a day trading strategy can be substantial. The risk follows suit. Remember anytime the reward of trading any equity is great, conversely the risk carries the same weight or more if things go south. Ill give an example. I explored day trading a a strategy briefly in my investing career . A stock was purchased at 10 AM one Friday morning priced at $ 8.32 . 2000 Shares were purchased. The stock quickly rose to near $9.00 one hour later. The stock was held. Why? Pure and simple greed. If it went that high that quick perhaps it would go higher, right? That’s the problem with most beginning day traders. There are ways to make money with dat trading but it is not for the faint of heart. By the way the stock mentioned above was sold at the market close that day at under $7.50 a share, money lost and lesson learned

Long Term Investing

Long Term Investing on the other hand reduces your risk substantially and your stress level. Thinking of your investment on a long-term basis, takes away the day-to-day monitoring, even the minute-by-minute monitoring required in day trading. So what happens if your stock goes down on price? Market declines are a normal part of the equity investing cycle. So long as the story behind the stock is still good, market downturns can provide investors with buying opportunities that can add to their long-term growth potential. Stock experts say over the long term the stock market is still the place to put your money if you’re looking for the best returns. Here is another example , albeit one that has a measure regret. There was a day when IBM was the bell weather stock of the Stock Market. As IBM went so did the market. IBM simply controlled the comuter industry. I had read about a company named Dell Computers and did some research on the company. I decided no one could compete with IBM. I was wrong obviously , but the point is what if I had invested just $ 1000.00 dollars in Dell on that day and held the stock. I will figure out what it would be worth today and post in another article . Suffic to say it would be a significant amount.