STOCK INVESTING FOR DUMMIES

Posted by stocker on March 9, 2010 in Stocks For Dummies | Short Link

Are you a new investor who is interested in stocks? Everyone at one time or another becomes at least a little bit curious about the stock market but few people ever really get involved. At least not directly by buying and selling stocks on their own.

If you are interested in finding out what it would be like to have a portfolio and do your own stock investing, you might want to sign up for the free stock simulation game called WallStreet Survivor. Not only can you use it to learn how to trade (with virtual money), but there are also a lot of tools and resources that will aid you in gaining a greater understanding of how to get started trading stocks.

Stock investing is something you should only do with money that you can afford to lose. There is risk in stocks no matter how safe your choice(s) seem to be. If you invest money that you know you need or will need, that is truly stock investing for dummies and you should not complain if you lose money. Not all investing is risk free and betting on stocks is one of those that carries various amounts of risk.

Too many people had all the money in their 401K plans invested in stocks and that is why so many Baby Boomers are having trouble retiring right now. You see, that was retirement money they need right now or very shortly from now and the market downturn took a lot of it away. That is why it is smart to invest less and less in stocks the older you get. Had they switched their 401K investments from stock mutual funds into something safer, they would have lost less and been much better off than they are now. 

Learning how to buy and sell stocks is actually quite easy. Most people do it all online now by signing up to one of the many stock broker sites. Anyone who has any familiarity with the Internet and computers can learn to trade and manage their account. It is the actual stock picking and figuring out what to invest in that is the hard part.

Picking the right stocks and knowing when to sell them is something that people struggle with every day. It is sort of like predicting the future and no one has a 100% success rate. Even if you somehow had insider information it wouldn’t guarantee you that you would make money. You see, there are a lot of factors that go into determining a stock’s price and the one that plays the biggest role is that of perception. Stocks are bought and sold everyday and their price is based purely on what people are willing to pay for them.

The free market as well as supply and demand determine stock prices. Of course, a lot of that demand (or lack of it) is based on how well a company is doing. For instance, if a company is having troubles like Toyota is right now, people know what is happening are are less inclined to buy the stock. Less demand means a dropping share price. Conversely, if a company is on fire and releasing products that everyone loves, it is perceived that they will be making money and people will bid up the price of the stock due to high demand.

People use a variety of methods to choose their stocks. A lot of stock picks are in financial magazines and newsletters that can be subscribed to. There are radio talk shows that discuss stock picks as well as a good number of investing shows on television where you can get all sorts of information. Those are the places that most people probably get information on stocks and where they base their decisions off of. A lesser number of people actually know enough to do their own stock analysis and find stocks they are interested in on their own.

A good number of people don’t invest in individual stocks but instead put their money in something known as funds. Mutual funds are investment vehicles that are comprised of a group of stocks and they are managed by a professional. There are fees associated with putting your money in a fund but it is often thought that a professional stock fund manager has a better chance of making money for you than you do yourself. You can put your money in thousands of different funds that each have their own investment objectives and you can choose a fund based on what types of stocks you would like to put money into.

Stock investing has always been thought to give a person the highest return over a long period of time. Because of the risk involved, buying stocks for short term investments is never recommended in case the market goes down. If you have money that is only available for a short time, it should be put in bonds, CD’s, treasury bills, or some other safer investment that is guaranteed through FDIC insurance.

However, if you have money that you don’t need for 5 or more years (and that number is arbitrary), any long term investment plan that involves stocks should be able to overcome periodic market dips and will most likely provide a nice return many years later. The more years you have to invest your money, the safer you should be in the stock market because you have time to make up the losses during the down periods and the up periods can be quite profitable.

 

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