Investing In Stocks

As it is now booming economy, this is right time for investors to take stocks of where they are and where they want to be. Investing in shares is a great way to earn money besides your business or job. You should be very clear about your investments whether you want it for a long term or for a short term, less risk involved means low profit or high risk involved etc. and investing is not for those who can’t bear losses. Let’s take a poll, how many of you have ever got in trouble just because of investing in shares at wrong time or investing in wrong company? I am pretty sure many of you. Here are some useful tips that will help you in making wise decisions while investing:

Warren Buffet on How to invest in Stocks?-->

• ·         Review your financial statements: First thing you should do is review all your financial listings i.e. your assets, income, liability and expenses. Compare all your income and assets with your expenses and liabilities to come up with a debt and equity ratio. This information will help you in making your financial plan that is long term. So it is advisable to do it very honestly as money you can’t get your money back easily in long term.  And never ever invest money that you took on loan.

• ·         Decide your goal: You should decide first whether you want investment for a long period or a short period and the risk factor involved. Investments with high risk often give high return on investment whereas a low risk investment gives low interest.

• ·         Keep it Simple: Keeping in investing is not stupid. Don’t trade too often, or focus on irrelevant data points and don’t try to predict the unpredictable because that can let you into some trouble.

• ·         Diversify: There is no better way in long term to distribute your risk over stocks of different companies. However, by diversifying your investment, you may not get very high return on investment but that it will decrease your risk factor. It’s true that single stocks or individual sectors may give you fantastic rate of return but we can’t deny the risk factor. Now, it’s upon your capability, how much you want to earn at how much risk?

• ·         Do regular check: After investing in a company, now it’s your homework or job (however you takes it) to keep check on company. Stocks are not merely things to be traded, the represents the ownership interest in company. So behave like an owner of the company. It means reading and analyzing financial statements of the company, weighing the competitive advantage, predicting the future trends.

• ·         Buy shares at right time: When prices of shares are low, that’s the right time to buy shares. If you let share price alone guide your buy and sell decisions, you are letting the tail wag the dog. It’s the mentality of some people that they buy stocks just because their prices have recently risen and some people sell their stocks because their stocks recently performed poorly. When stocks have fallen, they are low, that’s the right time to buy them and when they are skyrocketed, sell them. Don’t wait till last moment in greed of more appreciation of your stocks.

• ·         Be aware of Brokers: How many of you deal with a stock broker when dealing with stocks. Just remember that people who sell investments products make money by doing so. Their advice may not be correct every time. So just don’t take action any action on their advice. Do your research and analyse whether to sell, buy or hold a stock. Always go through company’s most recent financial reports. Don’t buy any investment that you don’t understand. Stock brokers may ask you to increase your investment limit as to get high brokerage fee. 

·         Don’t go beyond your limit: You should have enough money in order to have roof over your head and food to eat. Investing is a side business unless you are a professional investor. So don’t go beyond your limit when investing. Pay yourself first. Make sure that you have enough money to cover any unexpected expense because investments may be for long term. So invest only that money that you extra. 

       Here are some more tips on investing-http://news.morningstar.com/classroom2/course.asp?docId=145666&page=2&CN=sample

        

      References:

• http://www.cartoonstock.com/directory/s/stock_market.asp
• http://www.sec.gov/investor/pubs/takingstock.htm
• http://www.sec.gov/investor/pubs/takingstock.htm
• http://news.morningstar.com/classroom2/course.asp?docId=145666&page=2&CN=sample