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Stock Market

A simple introduction.

When it comes to investing, the stock market is one of the first places most people think of. But is Wall Street a good (or even safe) place for first time investors to start?

Do your research and the stock market can be a great place for investment.

The stock market is by no means a sure place to invest your hard earned cash, but with time and research you can get in on Wall Street without paying a fortune in subscription charges and fees. If you have a large or regular amount of money to invest (but no time to research and monitor the open markets), you can simply have a ‘broker’ handle your investments on your behalf.

Make sure to thoroughly do your research before investing. Not only should you research the stocks, options and bonds you’re interested in, but the platform you use should also be thoroughly explored. Understanding the tools available will ensure you have not only the features you need, but aren’t paying for extra “professional” features you don’t need.

Look after the pennies, and the dollars look after themselves!

It’s easy to overlook the impact of the charges your online trading will incur. Smaller trading fees when purchasing can mean larger commission fees when you come to sell your stock later. You’ll need to decide what kind of investor you’re intending to be (long term, occasional, day trader) and how much money you are looking to invest, to determine what pricing plan is best for you. We’ll look at platform options later, but for now let’s explain what it is we’re actually looking to buy and sell.

 

Stocks.

What am I buying?

When you buy any shares or share of stock, you’re purchasing a share of ownership in that company. The company is owned by its collective shareholders, and each one of those shares has a claim on assets and earnings. Depending on how many shares you own, you may get voting rights on major company decisions.

How is a stock’s value calculated? 

The behavior of the market is based on enthusiasm, fear, rumors and news. Over the long term, though, it is mainly company earnings that determine whether a stock’s price will go up, down or sideways.

As a general rule, it’s best to hold stocks from several different industries. That way, if one area of the economy goes into the dumps, you have something to fall back on.

 

Different types of stocks.

Markets are often divided up by a number of different parameters and they can include;

  • A company’s size (typically measured by market capitalization)
  • Sector
  • Types of growth patterns

For example, you will come across investors talking about “large-cap” stocks vs. “small-cap”, energy vs. technology stocks, or growth vs. value stocks.

 

Tools of the trade.

There are many different platforms you can use to invest and you should investigate them all to see what’s best for your needs. I have a modest sized stock portfolio so I use a low cost trading platform for my trades. Since I’m not investing huge somes of money with each trade, keeping fees and trading cost down were a priority over the most complicated professional tools. There are many universal trading rules, processes and tips that apply to any platform, and that’s what we will be talking about. I can only provide explanation for what I personally use for trading and that is zecco.com

Stocks, Stock Options or Derivatives, Bonds and Mutual funds can all be traded online at relatively low cost. Services like zecco.com offer a low cost trading platform with all the bells and whistles of the big boys. You can trade online with your computer, tablet or smart phone, all with real time statistics and trades. Having the benefit of low cost trades when you’re investing modest amounts of money (let’s say $100 or so) means your profits are not eaten away by trading fees. Paying larger fees also impacts how much stock you can afford to buy in the first place. Remember (especially when starting out), look after the pennies, and the dollars look after themselves!

Inside, there is also a great support and training centre. I strongly advise you to read and watch everything you can, don’t just buy stock and hope it goes up. You can protect your investments by placing stops on them at a certain price, so if the stock price falls it automatically sells.

Not putting stops on my stocks was the first mistake I made when investing in the stock market and I’m amazed how many people I talk to who still don’t place stops on their investments.

Zecco’s support and training centre has tons of information, so be sure to use it, get informed and get equipped.

 

Do your research!

The more you know about the industry your stocks operate in, the better you can read and predict the performance of those stocks. There is no such thing as knowing too much about your investments and my portfolios growth and profitability has directly correlated to how much time and effort I put into my research.

 

Check major news broadcasters.

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Seems like I’m stating the obvious here, but Forbes, Financial Times, New York Times and the Wall Street Journal give a huge amount of high quality information daily. These are great resources to get not only specific details on an industry, but also get general news and trends, giving your investing mind a wider perspective.

 

Subscribe to financial newsletters.

I can’t tell you how many times I’ve gotten great tips or ideas from newsletters. They allow you keep up to date with what’s happening in a particular field without going through endless articles. Be sure to read up on the newsletters you subscribe to, though, so you know that you’re going to be interested in what the letter’s publisher has to say. Signing up for any old thing will just fill your inbox with emails you won’t read.

 

Download and subscribe to financial podcasts.

There’s nothing like someone talking to you to help you understand something. Podcasts have been an invaluable tool for me in all areas of investments and business opportunities. Researching subjects online is always a great way to learn, but I find podcasts particularly good at teaching you things that you didn’t realize you were looking for! They often have expert interviews, where someone in a given field shares their personal expirence or expertise. Listening to what others are doing and problems they encounter has brought a number of things to my attention that I may otherwise had never thought of.

 

Don’t get carried away.

When I first started trading online, I did a lot of reserch about what stock to buy. I would get up early and watch the markets, read articles and trends. I was committed to learning. I had success with the very first stock I bought. Climbing 32% in the first two weeks, it continued to gain and has now surpassed 100% increase. I thought I was a genius and quickly bought more stocks, excited by my new investments. Of course, without doing my research, these stocks didn’t do nearly as well and in some cases lost money. I made a beginner’s mistake and rushed into the market, savings in hand. Do not make the same mistake – research, research, research!  I was lucky to start well, it would have been very discouraging had I not had that first success, but investing in the stock market is a long term plan. If you go into it blind and gamble your savings, like in Las Vegas, you’ll probably lose.

 

Your investments shouldn’t be about gambling, they are about taking ‘calculated risks’.

 

So, you have researched your stock’s value, the company’s performance and its industry’s performance. You like what you see and decide to buy. Once you buy the stock, you can set a ‘limit’, which means if your stock’s value drops below a certain number, your trading software will automatically sell your stock. This way you can set maximum ‘acceptable loss’ and have a safety net preventing your investments from suddenly dropping in value. It also allows you to know just how much you are risking, so you don’t have it all on the table and you have your safety net. This is what is meant by calculated risk.

 

The stock market can be an exciting and interesting way to invest, but it can also be tragic. “Invest” first in your understanding of how it operates, and you’re much more likely to succeed.

 

ThirtySomething.

 

 

 

 

Image courtesy of rattigon / FreeDigitalPhotos.net

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