10 Stock Investing Tips That the Beginner Needs to Know
When it comes to investing in stocks many people assume that they can just jump right in and start trading without ever having done anything with stocks before. This is a very dangerous assumption and can lead to what can only be described as a financial disaster. (We don’t know about you but we hate those.) Like anything in this life it is best to start something new by taking baby steps, keeping your eyes and ears wide open and learning as you go, little by little. This is especially true when it comes to your financial health. With that in mind we put together a blog with the 10 best stock investing tips for beginners that we know of. Now I’m not saying that you need to take out payday loans online to start investing, but if you have the extra income this is a good palce to put it. While you may not be an expert when you’re done with our blog you will certainly no more than you do right now as you read this. Enjoy.
- Remember that, when you buy a share of any stock you are actually an owner of the company, albeit in a small fashion. Any company being traded is owned by the shareholders and each share represents your claim on any assets and earnings that that company has.
- Another vital piece of information that you need to know is that there are many different kinds of stocks. Company size, sectors, types of growth patterns and so forth all determine what type of stock that a company has. There are also large vs. small-cap stocks, growth vs. value stocks and energy versus technology stocks, to name just a few. Be aware of this before you start investing.
- Look at a stock’s short-term earnings to determine what’s going on with it now but look at its long-term earnings to get a better idea of what it will do in the future. Simply put, short-term behavior is based on many different factors but long-term is based on one thing; the actual facts about how your stock performed.
- If you’re looking to beat inflation, stocks are more than likely your best bet. It’s a known fact that, since the end of World War II, there has been approximately a 10% return yearly on stocks which is much better than inflation or the return on bonds, real estate and most other savings and investment vehicles. With that in mind we recommend stocks for taking care of your long-term goals like setting up your retirement fund.
- While the market tends to rise and fall together there are always stocks that will buck whatever trend is actually occurring. Even if the market is going down you may find an excellent stock that is increasing as well as a lousy stock the decreases while the rest of the market is booming.
- Remember that an excellent track record, while it bodes well for the future, is not a guarantee that your stock will increase in value. The fact is, even stocks and companies that have done well for years can sometimes slip.
- Looking only at the price of a specific stock is a bad way to tell if it is ‘expensive’ or not. For example, if you find a company that has excellent earning prospects their $100 per stock price can be seen as a bargain while a $2.00 per stock price can actually be expensive if the company that issued the stock is poorly run and eventually fails.
- A good investor must learn to compare stocks by not only their prices but by their value as far as revenues, earnings, cash flow and other vital criteria go. Comparing a company’s performance to other companies in the same industry before you purchase their stock is also an excellent idea, keeping in mind that you will sometimes find slow growth industries and need to judge them differently than a company in an industry that has strong growth.
- The smartest investors know that having a portfolio that is diversified is the best way to protect their investments. The reason for this is simple; if you put all your eggs in one basket and that basket drops, you’re going to lose a lot of eggs. However, if you have many baskets and only one basket drops, you will only lose one or two eggs. We recommend more baskets so that, when the time comes, you’ll have a lot more eggs. (Our apologies to chickens everywhere for the analogy.)
- Investors who hold onto their stocks for the long term usually make out much better than those who buy and sell too often. While the fact is that the cost of trading has dropped dramatically there are other trading costs that can easily eat up your profits if you’re not careful. Unless you are a full-time trader you probably don’t have the time to play as close enough attention to the market as you should if you’re going to buy and sell regularly. It’s for that reason that we recommend that you don’t but rather hold on to your stocks for the long term, especially if they are showing gains every year.
And there you have them; 10 excellent tips that should help you to get started trading and putting together an excellent, diversified portfolio that will pay high dividends down the road. Again, you don’t necessarily need to take out cash loans to start investing, but if you have the necessary funds then don’t hesitate, because inflation will get you everytime. We hope you enjoyed this rather wordy blog and that these tips were valuable for you. Best of luck with your investing plans and please come back soon for more investing, financial and general tips for saving money. See you then!
Filed under: Investing
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