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Stock Market Investing Directory  - Article Details

How to Invest in Stock- 7 Stock Market Investing Basics

Date Added: July 01, 2008 01:57:22 PM
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Category: Advice

How to Invest in Stock- 7 Stock Market Investing Basics
By Star Smith

When you are new to investing it’s wise to get some good stock market investing advice before you attempt your first online stock trade. You’re in luck, because there’s all kinds of information for the beginner. Investing stock market books, forums, and newsletters are abundant. However, the best stock investing advice is the simple tips that are often overlooked in the heat of making trades.

Therefore, here’s your first stock investing tip: Read the following 7 stock market investing basics until you have them memorized. Keep them handy for times when you are feeling extremely good or bad about your investments.

Three mistakes to avoid when investing:

Putting all your investment eggs in one basket: I’m sure you’ve heard it said by financial experts and other investors, but it’s worth repeating again – DIVERSIFY. This one word can save you from losing all your money in a market segment that suddenly takes a turn for the worse. It’s tempting to stick with one market segment or one type of company when the prices are going up, up, up, but this is a very risky strategy. Never invest in just one industry. Learn to diversify your investments so you will still have steady earnings even if one of your segments goes down the tubes.

Attempting to time the market on your hunches: Knowing when to buy and sell is one of the hardest things to learn about investing. Even the experts get it wrong on a regular basis. Don’t assume you know when it’s best to buy or sell without expert guidance. Many average investors have lost their shirt when they got their timing wrong. A few people seem to have a gift for timing the market just right. If you find one of those people, treat them like gold.

Not reinvesting profits back into other investments: A key reason why some people get extremely wealthy from investing in stocks is the fact that they discipline themselves into putting that money back into other investments, where they can earn even more money. The concept is called making your money work for you. When you cash out, your money stops working for you. Yes, you can put it in your checking or savings account, but that’s when you’ll be tempted to spend a lot of it. The best thing to do with your profits is get some expert financial advice on how to keep reinvesting a big portion of your money into other stocks.

Four investment truths you must follow for success:

Buy low and sell high: I know this seems like such common knowledge, but you’d be surprised at the people who will buy an expensive stock because of its sudden popularity. The sad fact is that these people have already missed out on the big profits that others made when they bought the stock when it was cheap.

What goes up must come down: Some high flying stocks seem like they will never come down to earth. It’s fun to watch a stock double, and even triple in value. Wow. This could last forever, you may be tempted to think, but stock market history will prove you wrong. At some point every stock will go down – the question is when?

When it starts taking a dive will you be prepared to sell quickly in order to avoid taking a big loss?

Don’t try to figure out why: Stocks move up or down for a variety of reasons. The sky is blue and the grass is green is as good of an explanation as any as to why your stocks are behaving the way they are. Quit navel gazing and get back to working your investment strategy. Most successful investors don’t worry about why their stocks are going in any particular direction. They are too focused on the mechanics of making money.

Be aware of early trends: You get a tip about a big new trend that’s coming into the marketplace six months from now. The recommendation is for you to buy stock in this market now. You hesitate and then forget about it. Nine months later your uncle, brother, cousin and friends all know about this new trend and are jumping in the market – and so are thousands of others – driving the cost of the stock up.

Now you’ve missed your opportunity to take real advantage of this trend and get in while you could still buy low. Smarter trend watchers are now making big money. All you can do is think about how you could be rolling in dough right now. You could kick yourself for not acting sooner.

If you take the time and do some solid stock investing research, you’ll find that remembering the above 7 stock market investing basics will be enough to keep you grounded and making money for years to come.

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Article Source: http://EzineArticles.com/?expert=Star_Smith
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