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[N223]New To Stock Market

by Terry Detty, Ter

The threshold question to ponder before you decide to invest in the stock market is whether or not you are the investor type. For some people the stock market may not be suited to their personality. This article addresses some of the qualities an investor should have in order to make a reasonable return in the stock market.

Sure, there are folk tales you may hear about the guy who bought XYZ Company stock for $5 and sold it 60 days later for $50 a share. This scenario probably has happened , but it is not the reality of being an investor. The following points should be considered when you are considering becoming an investor.

Are you self-disciplined in your thinking?

The first step anyone must take into account is their own personality. Are you objectively a person who is organized in your thinking? Do you know how much money you have to invest? Do you know how to set objectives in your finances? Have you set goals for savings and followed through on those objectives? An investor has to have a clear set of objectives in their choice of investments. Is the amount of money you intend to invest a one time wind fall? Are you able to set aside a certain amount of money each month to investing that is disposable income?

In effect what you will be doing is moving some of your pass book savings to an investment. Patterns development in peoples lives. Are you able to transfer your savings pattern to include a regular investment in the stock market? If you are currently earning a small percentage on your pass book savings account what rate of return would you be satisfied in receiving? The key to investing is to know your expenses and income and decide how much money is disposable income. It is this excess that will be your investment dollars.

Are you able to set goals and listen to good advise?

Once you have determined that investing may be a possible avenue for you to consider the next step is setting goals. A goal is the objective of your investment. It could be for retirement, a vacation home, a rainy day fund or a new boat. Whatever your is determines the type of investing you will be looking for in your research.

If it is a long term goal like retirement you may seek a tax exempt municipal bond fund or a mutual fund with certain characteristics. If you want liquidity like a pass book savings account where you can draw money as you need it there are some investments that may fit. The important aspect of this step is to know your objectives and then draw up a budget or a plan.

All of the major fund companies have managers and consultants. Are you able to set forth your objectives and ask for advice in picking out a fund that will fit your needs? This does not mean you need to sign up for the first consultant who takes your call. It means can you listen to advice and make a decision on various alternatives offered to you.

After you have gathered all the information you believe is necessary for your decision can you apply your personal goals with the information presented and make a final decision?

This may seem like an odd inquiry, can you make a final decision? Unfortunately, some people will feel quite comfortable going to a car show room and purchase a $30,000 automobile. The color, impression, and internal motivators. But when it comes to investing, the buy is not as dazzling. It takes consideration to commit $30,000 to an investment in paper form even though you may be purchasing stock in the flashy car company.

Can You Let Go?

The final and perhaps most important aspect of deciding if you are a stock investor is, YOU. After you have gone through all of the self analysis, goals, research and advice of others and made your final decision the next step is critical. Do you have the personality to allow your investment to take its course? Can you sleep at night? Unless you are a day trader who plays the upside and downside of the stock market and I would not recommend this to anyone starting out.

You have to be able to roll with the punches. Trust your instincts and review your investment on a monthly or quarterly basis. If you buy individual stocks, place a limit order on the account. A limit order allows your broker or on-line account to sell if the price goes down.

The mutual fund investment works differently that buying individual stocks. If you are satisfied that your choice of a fund met all of your criteria for investing let it alone and review it only periodically. If your mutual fund for any reason meets with unexpected long term problems you can change funds. I would review the fund on a quarterly basis and discuss this with the fund account manager or representative.

This is the investor personality that you need to have in order to have a lifetime of success in the stock market. If you have it, it works. If you don't, try another type of investment.

1. Know that any type of investing involves risks. There is a certain degree of risk associated with all types of investing. Stock market investment involves quite a high risk, but internet and high technology stocks are the considered to be the most risky.

2. Not all stock investments will bring in large gains. In fact, many stocks actually gain little or may even lose money. It is a fact that a relatively small number of stocks that are traded are responsible for the large gains on the S&P 500 and NASDAQ.

3. Only invest money that you can afford to lose. It is advised that you only invest relatively small part of your total assets directly in the stock market. And even then, only invest that much if you are able to do so and won't "miss" the money should you lose it. In short, don't use your emergency fund, retirement money or your child's college fund for stock market investment.

4. Never borrow money to invest. Do not borrow money from your credit cards, take out loans against your home or dip into your retirement account to finance your trades. This is particularly true if you are investing in the more volatile type of stocks.

5. Diversify your investments to lower your risk. Spread your stock market investments over different types of securities to minimize your risk. If your portfolio is diversified then your risk is lessened because a loss in one investment may well be balanced by gains in other investments.

6. Make sure you know about the stocks in which you invest. You should only buy stocks that you have researched and you know something about. Don't buy stocks based on a rumour and definitely do not go with a stock solely on information that you have acquired online, especially if it was in an investing chat room.

7. Use limit orders instead of market orders when entering the market. If you are buying and selling volatile stocks such as internet and high tech stocks you should use limit orders which specify the highest price you will buy or lowest price you will sell a certain stock. Market orders, on the other hand, buy and sell at the current market price.

8. Finally don't forget to pay your taxes. When you trade stocks in the short term, the profits that you receive will be considered to be income and are subject to your regular income tax rates. However, assets that are held for a year or more are eligible for the lower capital gains tax rates. This will differ from country to country so you should check with your local tax authorities.

Keep these tips in mind when you are investing on the stock market. Stock market investment can produce big profits, but it can also incur large losses. It is important that you look at the whole picture and not just the best parts.

Article Source : Advantages And Disadvantages Of International Investing

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Both Terry Detty & Roger Overanout are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Terry Detty has sinced written about articles on various topics from Advertising Guide, Investing and Trading and Internet Marketing. Terry Detty recommends you look at some and. Terry Detty's top article generates over 90500 views. to your Favourites.

Roger Overanout has sinced written about articles on various topics from Home Security, Home Schooling and Business and Finance. . Roger Overanout's top article generates over 201000 views. to your Favourites.