Stock Investing Tips For Beginners

That is the key to successful stock investment. Do not listen to any person just because you believe he is more professional in stock investing then you are. Rather, seek to think and analyze and learn more on your own before deciding which techniques best matches you. Once you have developed your own investment idea, stick to it and trust only yourself.

Having a margin of safety

The margin of safety, just put is a buffer that you put in place between what you perceive to be the worth of the stock and its price. If you value a stock to be worth one dollar and you just buy it if its rise is fifty cents, then your margin of safety is fifty percent.

Deciding how much margin of safety you should provide to a sock varies for firms in different industries and is another topic in itself.

In summary, a margin of safety is necessary to save your capital in case you were wrong in your primary assessment of a stock pick.

Invest for the long term

The reality about the stocks market is that real money is made in a few days. If you are continually entering and exiting the market, possibilities are that during the few days of a real increase in price, you would not be in the market, thus missing out on incomes.

Investing for the long term also keeps you on commission paid to the broker, capital gain taxes and puts the power of compounding into play. The difference between buying for the long term and trading in the market is very important and should not be rejected.

Must understand when to sell and when not to sell

Most people panic and sell stock when the price drops. When the price of a stock drops, check the principals again. If nothing has replaced, then your assessment of its worth should be the same and this means that the stock is at an even bigger discount then what you previously bought at. In this case, you should take the chance to buy in more of this stock.

Keeping cash

Keeping cash with you permits you to capitalize on unexpected dips in the stock prices due to some market ups and down which are not resulted from a change in the companies principals. In these examples, you should average down and buy more of that stock. The bad thing that can happen to you is not having cash to average down on a buy which has now presented at bigger discount than before, due to your need to forever keep all your cash in the market to feel that you are investing.