How To Invest In Stocks
Discover The Best Ways On How To Invest In Stocks At The Cheapest Price For The Maximum Profit
You have made a decision to learn how to invest in stocks. Some people believe that deciding to make investments in stocks is the same thing as taking up gambling. There is some truth to that viewpoint, especially since investing in stocks, no matter what kinds brings the risk of losing money. However, as in any endeavor if you do your research and put the time in you can reap big rewards.
So just what is stock?
Stock certificates are used to acquire fractional ownership in a company. You purchase shares of ownership with a corporation and in return they can then use that money to grow and expand their business. Most people buy stocks with the expectation that their stock will appreciate over time and they can then sell it for a profit or live off of the dividends. Simply put, dividends are payments made from the corporation to shareholders, it is a portion of the corporate profits that are paid in cash to its owners. Many people use a strategy of investing in stocks to watch them grow over their lifetimes so they can retire on the dividends.
So what are some of the things you need to know to invest in the stock market?
Well, for one thing there are two main philosophies that are applied to investing, I am talking about the main ones because there are never ending theories, tricks, systems, and abstractions that are applied to buying equities.
The Fundamentalists
A stock fundamentalist is someone who relies upon large amounts of data regarding a particular company they are interested in investing in. To do this they listen to quarterly conference calls, pour over different data, such as earnings per share, or who the company is hiring or firing. The fundamentalist takes all this data in and tries to make a rational decision based on the facts presented to them on whether or not this would be a good company to take ownership.
The disadvantages of being a fundamentalist in my opinion is the seeming ever looser standards for accountability and truthfulness in accounting. Many accounting tricks and loopholes have been put in place to help companies look better than they really are, which can seriously mislead the fundamentalist in his quest for the best information.
Technical Analysis or Charting
Technical Analysis or Charting has to do with looking at charts or price points in the past and finding trends to help choose which companies should be bought or sold. The technical analyst believes that it is impossible to take in all the fundamentalist’s information while taking into account all the unforeseen variables that can make a stock’s price change. I think the disadvantages to technical analysis or charting is that past performance cannot guarantee future results, so in looking to the past or trends, many chartists can be mislead on when the price is going to break to the upside.
Once you have decided which group you will belong to, or which hybrid of the two you will follow, you can begin to do research into the kinds of stocks you will begin to invest in. If you have decided that you are good at math and numbers and love to learn visually you may want to look into technical analysis. If you enjoy gathering large amounts of data and interpreting it in vague and general ways to form theories and hypothesis then you may want to look into fundamentalist territory.
Each school of thought has their top authors and theories that can be applied, and I highly recommend reading as much as you can and paper trading with what you learn until you are ready to take the plunge and actually put some skin in the game by buying shares yourself.
After you have done some research you might want to consult with a stock broker, they will usually try to put you in portfolios that they recommend, I would stick with what you know and have researched. The reason why I say you should consult a stock broker is because they can help you get started in the endless small details you should know to execute trades. I learned how to trade that way and having someone explain to me the ins and outs of stop loss orders and how to read the different stock information on the tickers was priceless.