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5 Stock Market Tips to Make You a Smarter Newbie Investor

In investing, the most potent firearm you can carry is knowledge.

As you begin to invest in stocks, here are five tips to help you navigate the choppy waters of the stock markets:

1. Never invest in the market more money than you can afford to lose. Okay, so this is more a rule than a tip, but it’s probably the most important point to make about investing in stocks.

While you can make a lot of money investing in stocks, you can also lose big, though the chances of you losing big decrease the longer you stay invested in the market and the less frequently you trade.

If you are highly risk-averse, then it’s better to totally avoid the stock market. Stick to cash or money market instruments like certificate of deposits (CDs) and commercial paper.

2. Never invest in a stock unless you understand how the company makes money. If you’re going to hold a stock for a very long time, it pays to understand how the company makes money. This will help you make better buy and sell decisions – see tip 4.

To understand how a company makes money, you’ll probably have to read its Annual Report or 10-K. Another good way to get this insight is to listen in on a company’s earnings conference call, where stock analysts grill company executives about the financial health of a company.

3. Practice Dollar Cost Averaging (DCA) when building position in a stock. DCA is an investing strategy whereby you invest the same amount of money in a stock at regular intervals – like every week or month – regardless of the price of the stock when you buy it.

If you buy when the stock is trading high, you get fewer of the stock, and if you buy when the stock is trading low, you get more of it. Many online stock broking companies will automate this process for you.

DCA allows you to build a position in a stock at a pace or contribution level you are comfortable with. Furthermore, with DCA, you don’t have to “time” the market – to try to buy at a particular price. Until you know what you’re doing, DCA is more reasonable than buying on “gut” feeling or buying because Jim Cramer said something good about the stock on Mad Money.

4. Buy on the rumors and sell on the news. This is a common adage among investors. Once you’ve built position in a stock to a level you’re satisfied with you may want to start buying and/or selling it outside of a regular schedule like DCA.

Studies have shown that when the market anticipates good news from a company – like a good earnings report – its stock price often starts to rise days before the news becomes official.

Therefore, you want to buy the stock once the rumor breaks. If you buy on the day the company delivers the good news, you’d probably miss out on much of the gains. Traders, who typically don’t own stocks for a long time, will often sell and take “profit” once the company breaks the good news. This is what investors mean by “sell on the news”.

If the market expects bad news, then don’t wait until the company breaks the news before you sell because by that time, the stock may have bled profusely.

Realize that your company does not have to be the newsmaker before you act. If you hold company A’s stock and Company B, a competitor, is the newsmaker, then your stock is likely to react to company B’s news since they are in the same industry.

5. To get the best prices make your trades at the start or at the end of the trading day. The first and last 20 minutes or so of the trading day often witness the most activity by investors. During the start of trading, investors try to be the first to capitalize on pre-market news so the scramble to get in or out of a stock tends to make stocks “gap up” (price shoots higher than previous day’s high) or “gap down” (price shoots lower than previous day’s low) depending on the nature of the news.

Institutional investors often come into the market to trade during the quiet times – like lunchtime – or towards the end of the trading day.

Continue to arm yourself with knowledge and recognize that a “trader” is different from an “investor”. A trader hits and runs while an investor buys and holds. These days, however, most self-directed investors are not on the extremes. Sometimes they run like traders, and other times they walk like investors. Get in where you fit in.

Try Out These Amazing Stock Market Tips

Whether you are a beginner investor, or a seasoned trader, you can always gain more knowledge about the stock market. That phrase that everyone knows about, “buy low, sell high,” isn’t all there is to successful market trading. There is so much more that goes into being successful. Continue reading so you can begin to learn how to be a profitable investor.

After you have chosen a stock, it is wise to invest only 5 or 10 percent of your investing funds into that particular stock. By only investing a certain percentage of your portfolio in each stock you are protecting yourself from financial devastation in case the stock does drop quickly.

The stock market is not a scheme to get rich quickly. To make profitable stock trades, you need to first understand how the market works. Take the time, make a couple of mistakes and learn from them. If you believe you’ll get rich overnight, you’ll be sadly disappointed.

When shopping for a broker, whether an online discount broker or a full service broker, pay special attention to all the fees that you can incur. Be sure to inquire about entrance and exit fees, as well. Over time, these things can add up, so double check to be safe.

When considering stock, think about whether you would use the product or service the company offers. Your own retail intuition can help you to make smart investments. After you’ve looked at their financial statements, make a judgment on whether you see earnings growth potential for the company. It might not be a good investment for you if you wouldn’t use the product. On the other hand, it could be that you do not have the qualification to judge them properly.

Before purchasing stock, you must have clear investment goals. For example, some might be looking to increase earnings with low risk factors while others are looking to increase the size of their portfolio. Whatever you want to do, if you have a goal it will enable you to develop a winning strategy.

It is normal to make investment mistakes at first. A lot of people who are new to the market tend to get disappointed if things don’t go their way. Always remember that you will improve with time, and that you should do more research and spend more time practicing so you do not make the same mistakes again.

Consulting a financial adviser can help you weigh options, even if you have decided to proceed on your own. An expert will provide you with more than suggestions for purchases, they’ll provide invaluable trading advice. They can help you figure out your goals, your tolerance for risk, and other important information. With the help of a qualified advisor, you can set out a reachable plan for your financial security.

Researching as much as you can about every company you are interested in investing in can really improve your performance in the stock market. Stay as informed as you can and don’t rely on hearsay alone. Remembering this advice will help you turn the biggest profit possible from your investments.

Stock Market Tips

The stock markets are at all time highs and just like the last time around when the market was at its previous high every one thinks that nothing can go wrong and there is just one way where the market can go which is UP. Nothing could be farther from the truth and this will be clear from the way the market behaves in the next few months. Here are a few tips that would hopefully save you from losing a lot of cash in the current frenzy.

Time and again investors have burnt their fingers in the markets and here are some tips to you so that you do not end up burning your fingers in this market.

The number one tip at this point would be to sell if you have stocks and not to buy them if you have cash. The golden principle in the markets is “Buy when everyone else sells and sell when everyone else buys”. Simple enough right? Not really. Why? Because of peer pressure pure and simple. When everyone else around you seems to be having a ball at the markets you would feel like a fool if you didn’t participate now.

OK so you can’t resist buying at this time then at least do yourself a favor and stay away from unknown Penny Stock and hot tips that your barber gave you. True that the stock has tripled in the last fifteen days but that was before people like your barber started buying the stock. Chances are that the Promoter of the company have started buying into the stock and have spread rumors like acquisition or a big export order to fool investors and sell out to them at a later date.

Another tip that would serve useful is to value a stock based on its future growth and not its past performance. For instance many investors say that I will not buy stocks of X company because it has doubled in the last year. Well it may have doubled in the last year but that should not be the thing you should be telling yourself. Rather you should ask yourself why has this doubled in the last year and can it do so again? There should be a solid answer to your question like the launch of a new product or reduction in the prices of raw material. And indeed if the answer is in the positive then by all means go ahead and buy that stock regardless of what has happened in the last year.

Another tip would be to remember what you are buying. Quite simply investors often forget that when buying a stock they are simply buying ownership in the companies. Most of you would know that nothing spectacular would happen in the company that you work for, in a month, they are not going to double their revenues and certainly not double your salary every month. Then why expect anything different from the companies that you are investing in. Why expect the prices to double in a month or two. Give time to your investments; don’t reduce it to a gamble. Only when you invest in fundamentally sound companies and then give the investments sufficient time to grow will you see some healthy returns on your investments. Ideally a minimum horizon of one year is a good time.

Hope these tips will prove helpful and you will make a lot more in the stock markets than you have already been making. Happy Investing!