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Time-Tested Strategies For Your Stock Market Investments

Savvy stock market investors utilize a number of buying and selling techniques to increase the return they see on their investments. These strategies help them figure the “right” time to buy and sell stock.

There are hundreds of ways that have been proven effective in helping to increase your earnings while minimizing investment risks. Let’s consider a few below.

Hedging

You can use the “hedging” technique to protect the money you invest by purchasing a “put” option. By hedging, you sell your stock at a given price as long as you do so within a specified time period, giving you more control over the timing of your investment decisions.

Another way to hedge your investments against risks is to sell “financial futures,” while the most expensive hedging method is to purchase put options for individual stocks.

If you are an investor with a significant portfolio of stocks, you may want to look into a put option to protect you from abrupt declines in the stock market.

Buy Cheap Dow Stocks

One strategy many investors use is to purchase the best valued stocks of the Dow Jones Industrial Average (DJIA). The tops stocks are the ones holding the lowest P-to-E ratios (i.e. Price-to-Earnings) with the highest dividend yields.

These companies have a high potential for growth and an established track record to monitor its investment history.

Buy the Worst Performing Dow Stocks

Another intriguing alternative that many investors use is to pick some of the stocks with the worst performance records on the Dow index. You can tell which stocks have the worst performance by looking at their price decline from past years.

Those this strategy seems counter-intuitive, the hope with such stocks is that they have been performing so poorly that there is nowhere to go except for up in value.

Purchase Stocks from a Broker by Buying on Margin

One option for buying shares of stock involves buying them using the money of a stockbroker. Doing so provides more shares of stock for the amount you spend on your investment because you do not pay as much to buy the stocks.

If these stocks, however, lose their value, the margin loss is much higher. Thus many investors have a stop-loss order for stocks that are purchased on margin, which is typically in the neighborhood of 10% of the total.

Dollar Cost Averaging vs. Value Averaging

Dollar cost averaging involves investing a set amount of money at set intervals of time. If prices drop, the investors receive more shares given the amount of money they spend. But, alternatively, an increase in the stock price means you then get back fewer shares for your money.

Value averaging, on the other hand, is the opposite of dollar cost averaging. Here you have investments that are assigned a regular value.

When the prices of these stocks go up, the investor allocates higher amounts of money to cover the increase. The investment is the average cost of the fund.

Value averaging is considered by many savvy investors to be a much better strategy than dollar cost advertising.

Tips on How to Play the Stock Market

It is important to come prepared before making any business decisions. Being armed with knowledge is a safe way to ensure that you will succeed in any endeavor you embark on. In this time of economic recovery, many people are studying ways how to play the stock market. You might be interested in it as a hobby, but most businessmen consider it a serious venture. It can, like any industry that you will get into, make or break your future finances. We are going to discuss today some tips that will get you started in the world of stock investing.

A stock market is a public avenue to trade company shares. This means that you can be a shareholder (or a part-time owner) of a company when you buy their stocks. If you want to know how to play the stock market, you have to study the trends in stocks. Research on the company that you are interested in and learn how experts do their trading so you can prepare yourself for any investment you will make.

Learning financial management is one way to make you prepared. You don’t have to be a certified accountant but you do have to understand the basic principles of accountancy, management and stock market history. Read widely on finance, trading, economics and investments. This will greatly help if you want to know how to play the stock market.

Most experts will tell you that they follow simple tips in how to play the stock market. The most basic rule is buying low and selling high. This means that you invest on stocks that are for sale at low prices. Sell the stocks once they get higher, usually when a company recovers from a previous slump. You should have a good entry and exit strategy. Set a limit for yourself in monetary terms. For example, you set a limit of a thousand dollars worth of profit or loss before deciding to sell your stocks. This can protect you from the risks of losing whatever you gained in the trades.

If you really want to know how to play the stock market, you have to ask the experts. There is no shame in asking the professionals and learning from the best. Some investment management software programs that can help you track and monitor your progress. Do not be discouraged if the market slumps because stocks really go up and down. Be objective in the decisions that you make. Best of all, remember that practice makes perfect. You too shall become an expert in stocks if you diligently monitor the trends and continue on improving your knowledge about stocks.

Stock Market Advice – Here’s Why It’s Free!

One of the most plentiful commodities in all of the world is stock market advice. It is readily available from friends and family. When your hairdresser or milkman finds out you invest in the market they will willingly provide you with free advice.

Stock market gurus appear frequently on the cable news channels and the network morning shows. They are fairly bursting with new stock tips. In this wonderful world of ours everyone has a ready supply of stock market advice.

This great abundance of free flowing stock advice is not a new phenomena. It seems to have sprang up almost as quickly as did the stock markets themselves.

Perhaps my favorite story of free stock market advice comes from Edwin LeFevre’s Reminiscences of a Stock Operator. As the story goes, two hapless fellows become angry at the man that keeps giving them bum stock tips. They have followed a couple of this tips and lost a great deal of money. In frustration the two compose a torrid telegraph message to tell the tipster off.

Just before they send the message, one of the fellows has second thoughts. He says something to the effect of, “Hold on, Jim. You’re not really going to send that message are you?”

To which Jim replies, “And why shouldn’t I?”

“Well, if you send that telegraph, he might get sore and never give us another tip!” the friend answers.

This amusing story illustrates the second part of the problem with stock market advice. Not only do people love to give advice on the stock market, they also love to receive a juicy morsel of stock market gossip.

It is just human nature. When you hear the latest rumor or the latest whisper about a certain stock, you feel like you are in on the inside story. These tips can fill your head with dreams of great fortune. Stock tips are very tempting to take seriously.

But in almost all instances, the only fairly priced stock market tips are the free ones. And even these can cause you to lose money you would not have ordinarily lost. Stock market tips are a very tempting form of stock market gossip.

They will undoubtedly be a part of the stock market for as long as we have stock markets. But they are really a foolish way of going about investing in the market. The next time you hear of a hot stock market tip, just smile and walk away. Your pocketbook will thank you later.