As we close this series on investing in stocks, we will introduce simply tips and strategies for those who are new to investing. The tips are practical and intended to help make sense of investing.
Invest in What You Know.
The stock price is based not on past performance but on what investors think it will do. You must know a stock so well that you can set your own expectations. Learn how to read stocks and related reports as well as buy the ones you think will go up. One way to do that is with a good stock screener like MSN’s StockScouter. Get to know your potential stock investment.
Buy Stocks of Companies that Have Simple Products and Services.
Buy stocks of company whose product or services are understandable to you. Understanding the business process is important before buying its stock.
Don’t get emotionally involved with your stocks. Follow a set of buying and selling rules, and don’t let your emotions change your mind. You want to stay cool when your stocks are taking wild swings up or down.
Behave Like an Owner.
Stocks represent ownership interests in companies. If you are buying businesses, it makes sense to act like a business owner. This means reading and analyzing financial statements on a regular basis, weighing the competitive strengths of businesses, making predictions about future trends, as well as having conviction and not acting impulsively.
Buy Low, Sell High.
Knowing when to both buy and sell a stock is key for success. When stocks have fallen, they are low, and that is generally the time to buy. Similarly, when they have skyrocketed, they are high, and that is generally the time to sell! Do not allow fear (when stocks have fallen) or greed (when stocks have risen) take over your decision making.
Do not do investment to make money, instead invest your money with the objective of generating more and more assets. (From Warren Buffet)
There are people who enter stock market for making quick bucks. Stock investing is not for making quick bucks, instead it is longer term money making machine. The term is so long term that investors even loose the interest of making money. Then what is the motivation for such long term investors? Their drive for investment is drives by their desire to become financially independent and go on accumulating as much “asset” as possible.
The purpose of the investing series was to provide basic information about a topic that can be difficult to understand. The key to investing is to research and understand the rules and products. Investing can become a source of passive income if you select your products wisely and wait patiently.
Remember our goal is to get Financial F.I.T. (Focused, Involved to Transform your life).
Until next week,