23 Jun

Discover Simple Stock Tips For Beginning Investors

Investing in the stock market is not for the unprepared. While putting money into stocks can be very profitable, it can also be very risky. It’s possible to lose all of your money if you don’t know what you are doing. In fact, the truth is, there is a risk of losing all of your money even if you do know what you are doing.

While there is a lot of potential risks involved in stock investing and everything seems stacked in favor of the big Wall Street investment firms and banks, it’s not all about luck for the individual investor.

There are hundreds of thousands of individual investors that make money with stocks by visiting the Trade Ideas Review website. To increase your chances of making money investing in stocks, it’s important to follow a few simple rules or stock tips.

It’s important to remember that making money in stocks can be done but it’s not easy. Everyone is looking for that quick, easy fix or secret that will allow them to turn ten bucks into ten thousand in a matter of weeks without any risk. It just doesn’t work that way!

1. Set Goals

You need to know what it is you want to accomplish. Are you looking to grow a retirement nest egg by investing a couple of thousand dollars in an Individual Retirement Account (IRA) every year for the next forty years?

Or are you trying to save money for your child’s college education five years from now?

Or maybe you want an immediate income that you can spend now.

These goals are very different from one another and how you approach stock investing should also be very different depending on the goal. If you have thirty or forty years before you need the money you can take more risks.

If you need the money next week you probably shouldn’t even be putting the money into stocks, no matter how good the company is behind the stock.

In order to set those goals, you’ll need to know the time frame you have for investing, how much money you’ll be investing and ultimately how much money you’ll need. Without these three things, you can’t properly invest in any stocks.

You must know your goals.

2. How Many risks Can You Stand?

How much risk you can or should take has a lot to do with your goals that were discussed above. But your own personal risk tolerance is important, too. If you have thirty years before you need your investment money back, but you can’t stand to see the value of your stocks take even a 5% dip, then you shouldn’t be investing in small market stocks that might lose 30% or 40% of their value.

The last thing you want is to invest in something that exceeds your risk tolerance so that you panic and sell it when it drops in value, only to see it rebound well past what you paid for it.

Let’s say you pay $10 a share and the value drops to $5. You don’t have a high-risk tolerance so you sell it. You’re left with only half the amount of money you had before you invested. A month later the stock is worth $15 a share. If you had invested $10,000 you would have $15,000 but instead, you have $5,000 because you invested in a stock that was too risky for you.

You must know yourself very well in order to invest in the right kinds of stocks.

3. Understand The Basics of Financial Statements

While you don’t need to know everything, it’s important to know the basic financial information with regard to companies and their stock prices. This means things like earnings per share (EPS). EPS is simply the profit the company made relative to its shares. If it made a million dollars in profit and there are a million shares outstanding, it’s EPS is $1.

Some other important financial numbers to research include return on equity (ROE), return on investment (ROI), earnings growth and price to earnings ratio (PE).

4. Diversify

Never put all your investment money in the same stock, or even the same type of stock. In fact, don’t even invest in stocks that are all in the same part of the economy, such as healthcare.

Keep these simple stock tips in mind when getting ready to invest and you’ll be on the right track to making money from the stock market instead of losing it.

23 Jun

A Simple Overview Of How To Get Into Stock Trading

Stock trading can be a great way to make money. But it’s not without risk and so it can also be a great way to lose a lot of money.

When first getting into trading stocks it’s important to understand a few things. First, you’ll need to know what your goals are for your stock trading. Are you looking to increase your savings for retirement? Are you looking to create current income and live off of what you make from stocks?

What’s your time frame? In other words, how often will you most likely be making trades? Are you day trading? Will you be holding stocks for a week? A year? Five years?

This seems like a lot of questions but they all play a part in what type of stock trading may be most appropriate for you, as well as the amount of risk that can be taken. In general, the longer the frame you have, the more risk you can take.

If you need the money you’re investing sometime next week, you really shouldn’t be trading stocks with it right now. The risk of loss is too great, with no time for recovery.

Once you’ve established your goals and answered these questions, you can begin looking into what type of trading you want to do.

For longer term trading or investing, the focus should be more on the fundamental analysis of the company itself. This means taking a look at things like the company’s growth prospects, such as its sales and earnings growth.

Is the company positioned to do well over the next few years? Are there growth opportunities such as bringing a new product to market or increasing their market share in an industry?

Another important factor when looking to buy or sell a stock of a company is its P/E, or price to earnings ratio. This is simply its stock price as a ratio to it’s earnings. In theory, a company that is growing earnings at 15% per year should have a price to earnings ratio of 15.

But other factors come into play, such as future earnings prospects. How fast a company is growing plays a big role as well, since traders and investors will pay a premium for higher future growth.

The famous value investor Benjamin Graham would look for companies that had a lower P/E than they deserved, usually because of short term issues, and invest in them to hold for the long term until the market caught up to their true worth.

This type of investing requires a lot of research as well as being a long term investing strategy. Even when picked correctly, it can take years for an undervalued stock to recover to its true worth.

When looking to do more short term stock trading, stocks move up and down on many other factors that don’t always go hand in hand with how the company is actually doing.

In fact, in the short term a stock can continue to go up or down based on the simple fact that its heading in one direction and the market (investors) jump on board.

This is trading based on trends. If a stock is going up short term, most likely it will continue to do so. The big risk is that you invest right before the turn around and lose your investment.

Short term stock traders focus more on technical analysis. Technical analysis is more about data based around the stock, and not the company. While things like P/E and sales growth are about the company, things like trading volume (how many shares are being bought and sold) are about the stock itself.

Technical stock traders will follow things like trading volume, looking for times when the volume of shares being traded suddenly jumps. This can be an indication that it’s time to get into or out of a trade.

Stock trading is not nearly as easy as some make it out to be and these ideas above are just scratching the surface of the variety of trading strategies that are available. It takes a lot of time and research to become a good stock trader and there are great risks involved.

But there can also be great payoffs with successful trades. But do not go into stock trading without having done a lot of research. It’s very important to be prepared when it comes to trading stocks.