Stock investment is definitely one of the strangest and most confusing methods of earning money known to man. Not only is the business loaded with all sorts of specialized terminology, the very nature of stock investment is paradoxical. Done properly, investment can be an exciting ride and a ticket to immense wealth and fame. However, stock investment also has a deadlier side, incomplete understanding of the techniques of stock investment can have catastrophic results. While almost everyone who ventures into stock investment fantasizes of being the next Warren Buffet, you cannot afford to neglect getting a solid foundation early on. This article will go through “Stock Investment 101”, the basic techniques and strategies of stock investment and help rookies like you to break into the stock investment world with a good sense of what to do.
Beginning your very first investment:
Let’s start at the very first step: finding a broker. Your broker is the pathway between you and the stock market. The broker handles all of your questions, worries and executes your directives. His job is to analyze various stock options for your consideration, offer tips on investment possibilities and also tell you how your current portfolio is going. There are two sorts of brokers: Full service brokers and discount brokers. Full service brokers offer the traditional one-to-one service while discount brokers are for more seasoned investors who don’t need as much assistance. As the name suggests, discount brokers are less expensive to employ and should definitely be a consideration once you become more knowledgeable. As a beginner however, you will want to go with a full service broker.
Always make sure you are at ease with your broker, going with a major brokerage company like Merrill Lynch or Morgan Stanley does not guarantee better results. As a rule of thumb, treat it as though you’re giving your broker a loan, if you would feel uneasy loaning the money, then the broker is not right for you.
Next, you have to decide which industry to invest in. Now, the best investors will have a varied portfolio comprising of shares from different industries, this is done so that if one market experiences a major setback due to scandals or decline in consumer confidence, then at least the other stocks will remain largely unaffected. While I would advise that you keep this in mind, I would urge you to begin in just one sector first. The reason is simple, as an amateur investor, you do not know all of the nuances and tactics of the trade yet. Furthermore, you would not be able to figure out the information related to your stocks. For example, in the electronics industry, a CEO change might not have a drastic result on the stock price while the same cannot be said of the banking industry.
For this reason, I would advise that you start off in a sector that you are familiar with, something that you have worked in before and have exposure to the proceedings of the sector. By doing this, you break into stock investment with a relatively secure approach, allowing you to become more experienced in trading without subjecting you to too much risk.
The first few years are your “learning years”, don’t go trigger-happy and buy loads of shares hoping to earn a quick buck. Instead, take your time and soak in all of the information that you can before raising the stakes and trying to earn the big bucks.
When you have decided on your market, you then need to choose an investment system. There is no hard and fast rule for this, even for rookies. The type of system you choose will depend not only on the market you invest in but also on your personal concerns and ambitions. Basically, such plans offer several investment periods and profits, it is up to you to decide which option to opt for. This is something to discuss with your broker thoroughly before commencing on any sort of investment. Once again, keep in mind that as you get more experienced, you will want to vary your portfolio to include different investment plans for the sake of adaptability.
There you go! These three steps are the fundamental basics in beginning your journey through the jungle of stock investment. Hopefully, these stock 101 tips will help you begin to understand how the stock market works and give you a good idea of what practices you should adopt. As with gambling, never ever overextend yourself – always invest within your limits and never invest more than you can afford to lose.