You need to consider some basics before you enter the world of
investing in stocks. The main reason: the stock market is a
field dominated by savvy investors, who know the ins and outs of
making profitable trades. For people who are not on the inside,
Wall Street can be a very dangerous place. Here are a few tips
that can help you in your beginning stages:
1) Don't even consider "tips" that tell you about "hot stocks".
Consider the source: if you had a huge, cannot miss, money
making investment tip, would you offer it the world at large,
free of charge? You wouldn't, and neither would anyone else. If
someone is touting a can't miss stock, they most likely have a
financial interest in seeing the stock rise. Conversely, if they
are rooting for the stock to miss, you can almost rest assured
that have "shorted" the issue.
2) Always do your due dilligence. You'll hear this advice over
and over again, and that's because it's extremely important and
bears repeating. You must always do your own due dilligence.
Relying on the advice of others, no matter how well intentioned
it may be, is almost always a recipe for disaster. Make sure you
dig in and really examine the public numbers and financial
releases from companies. Nothing tells the story more clearly
than the numbers. Ignore basic touting techniques like press
releases which have very little substance, and rely instead on
hype to tell the company's story.
3) Only invest money you can afford to lose. Sure this is a
basic point, but tons of people miss it. You should only invest
money that you can honestly afford to lose, and without any
tears, if the worst case scenario comes to fruition. Everyone
enters into investments with the right idea of earning big
profits, but in many cases, this never pans out. If you lose
your rent money, you can rest assured that your days of dabbling
in the stock market will come to a very quick and bitter end. ut
asides small amounts of money each week from your paycheck for
savings and investment and use that.
The learning curve for investing in stocks can be steep, but in
the final analysis is well worth it. In no other endeavor can
you make the types of returns that are associated with the
world's greatest stock investors. But make sure to take your
time, and keep detailed records of all of your transactions,
with particular attention being paid to what you were thinking
when you made the trade. Over time, this record will become an
invaluable instrument for helping you determine what type of
trade makes you the most money, and it will also give you
insights into your character as a trader. There's plenty more to
learn, of course, but hopefully these basic ideas will help you
on your stock investing journey. Good luck.
About the author:
Darren McLaughlin is the webmaster of the
Stock
Market Basics resource center.
