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[S1011]Stock Market Investing For Dummies

by Banjo Smyth, Ban

When you first start investing in the stock market you often feel as though you need a guide for stock market investing for dummies, but if you follow a few investing basics, it's not all that difficult. Stock market investing is nothing more than buying a small share of a business. With that in mind, it gives you a few investing strategies.

Stock market investing for dummies is a misnomer because everyone shops, eats, drives a car or watches the media. You already have an idea of investing strategies if you know a little bit about the products that you use on a daily basis. If you saw a company that offered neat new technology, you might buy the product, or, even better, buy a share of stock in that company. If this was March of 1986 and the company was Microsoft, one share would cost you about $25.00. Now fast forward that to the present time. The shares of Microsoft sell for around $26. You probably think that the investment is awful. Well, instead of one share, you now own 576 shares because the stock split so many times. Along the way you also received over $4.00 per share from dividends, this was after the splits took place. Had you reinvested that money you would have an additional 92 shares. Therefore, at this point, your single share of stock grew to a value over $16,000. That is not stock market investing for dummies, that's a buy and hold investing strategy.

Buy and hold is one strategy for stock market investing. The problem with buy and hold is that you need to know which company to buy and hold and which company to release because it's a dog. Krispie Kreme donuts went public in the year 2000 and everyone went crazy for the IPO (Initial Public Offering or when the stock first goes public.). This is quite typical. The price skyrockets and then often drops like a rock, particularly when the company is a craze. Donuts are good, and theirs are particularly tantalizing, but once the donuts saturated the market, they were no longer the novelty that people could only get on their vacation to the West. Today the price of is 1/10th of the original offering price. This one stock could cover several lessons of stock market investing for dummies.

Lesson number one of stock market investing for dummies from Krispie Kreme. Even though you love the product, if it's a one trick dog, stay away from it. There will probably not be many innovations to the donut unless someone finds a way to make it a healthy coronary disease fighter and at this writing, that isn't on the horizon. Although, the concept sounds like a delightful idea. People often go crazy when new trendy stock comes out and the IPO's sell high only to drop later. Look at the type of product and estimate if the demand will increase or new products are on the horizon.

Lesson number two of stock market investing for dummies from the Krispie Kreme example is don't buy and hold unless you get a bargain. If you bought the stock at $40, and saw it drop as boxes of the donuts hit every grocery store in America, take the short-term loss and dump it. You probably became a little less excited every time you bought another box and began to realize that the attraction for these donuts came from the short supply. Financial investing requires you to make hard decisions sometimes. These decisions sometimes require you to take a loss and salvage the money that you have.

Investing money doesn't require a lot of market knowledge and stock market investing for dummies simply put is investing strategies designed for ways you want to invest. If you are a buy and hold person, select companies that produce products that maintain a level of consumption and don't buy when it's trendy, wait until the price drops. If investing money means buying and selling rapidly to you, learn the patterns of the stock you want to buy or find out everything about the company that you can and attempt to invest before they put out a new product, then sell it when the price goes up.

Stock market investing for dummies is nothing more than deciding what type of investing you want to do, long-term or short-term, and then paying attention to those companies or the way the stock moves.

Everyone has their own take on different things, from business to investments and from beginner level to expert. But when it comes to stock market investing, investors seem to stand on more or less same levels as its all calculations and risk taking capability that counts. Though, like each task has its own difficulties at beginner's level, a beginner for investing in stocks has to face some difficulties. However, there is no better chance for investing in stocks than the present stock market. We are not talking of the boom in the stock market, the first rule for investing in stocks lies in being consistent.

There is nothing like investing tomorrow after the market gets stable. It is to be noticed that there is no right time for stock trading, if the right time exists, it is today. It's all about the right decisions about the company's position and its future growth prospects that an investor seek for investing. Other thumb rule for trading lies in being the decision maker. Always remember that the stock broker is the advisor and not the decision maker. Make your own decisions and get ready to bear the results.

Never go on others words; it is important to have your practical reasons behind any particular kind of investment. It is obvious that there are certain suggestions and tips that an investor may receive while trading, but, running after them is of no use. Apply your brains before investing in any kind of company. Also, it is inevitable to track the investments made in past. The past shares are the one that get you profits and losses.

The timing for selling and buying for the stocks must be decent enough to fetch you better returns. Decisions made without logical reasoning may lead to heavy duty losses. Also, setting a stop order limit may limit the losses. Stop order technique is quite practical and overcomes human weaknesses such as being emotional and illogical at times. It helps the shares to be sold at a particular limit before it gets sunk down.

Automated investments are another tool that may be devised to get the better returns in the stock market. This technique not only maintains a balanced portfolio but also, avoids major losses. The consistency and diversity is maintained well through automated investments. Integrating the portfolio in many companies is definitely important to have better returns and avoid heavy losses.

Talking about stock market investing gets the greediness in the light. For any investor, whether a day trader or long term investor, it is of utmost importance to say ?yes? to minor gains. Minor gains are better than no gains or losses. Most of the time stock traders wait for high growth in the price and do not sell them. This long wait may turn to sinking costs and losses to traders. Also, stop expecting the rebound boom in the share price. Waiting for the sunk cost to grow tremendously is sheer foolishness. Selling it at the right time is the best way for stock market investing.

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Both Banjo Smyth & Amit Malhotra 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.

Banjo Smyth has sinced written about articles on various topics from Stock, Finances and Investments. If you want to be rich then the easiest way to achieve this goal is to become an investor. SharesPropertyMoney.com is giving away a Free Investment DVD valued at $97.