Stock Market Basics – Core Position
In learning stock market basics, you will improve your returns and minimize your loses. Of course none of us want to lose any money, but it’s part of trading stocks. Everyone loses money at times in the stock market and if someone tells you that they’ve not lost money in the stock market, he’s only telling you half the story.
I’ve lost money over the years and in the beginning in bothered me quite a bit. Whenever that happened, I’d look at what I did and looked to see where I went wrong. Sometimes it was my research wasn’t thorough enough, other times it might have been the way I bought into the company. There were also those times that I didn’t do anything wrong, but because of the condition of the stock market as a whole, I would be on the losing end. Either way, I learned something for the next trade. Education is the key to wise money investments especially when you’re a beginner.
In this post I want to talk to you about “core position”. A core position is the stocks that you originally buy at a particular price. I’ve mentioned before about buying your shares incrementally and not all at once. So the first batch that you purchased would be considered your core.
In this example I’ll talk about company “XYZ”, which has a a price per share at $50. For this example I will also state that the cash in my portfolio is valued $50,000.
I never put more than 15% of my portfolio in any one stock. With that in mind, it would mean that I won’t invest more than $7,500 in “XYZ”. That tells me that I can only purchase 150 shares of “XYZ”. My first purchase will be 50 share at the price of $2,500, while keeping the rest for later buy-ins. The stock drops $5 per share in the nest week. I will go ahead and buy another 25 shares of “XYZ”, which will cost me $1,125. Another week goes by and the stock has been going up and down between $45-$50. I will simply sit on the sidelines and wait before doing anything. If the stock takes a dive because the markets have dragged it down I’ll buy my next buy at $40, costing me another $1000.
I now own 100 shares of “XYZ” with my average cost basis being $46.25. I’ve only invested so far $4,625 into the “XYZ company. If I had bought all of the shares at once, it would have cost me $5,000 (saving me $375).
When the stock goes back up to $50, I’ll only sell 50 shares of the stock (the ones the I bought at $45 and below). I will make a profit of $375 for those shares that I sold. While at the same time I continue to hold on to the original 50 shares.
When the price drops back down to the $45 range I will again pick up another 25 shares and start the process all over.
It the price had gone up after buying the first 50 shares that would have been fine also. I would pick up another 25 shares at $55. Once it rose above the price I would either waited for the price to drop back at the $50 level or if it kept going, I would just ride out the gains as it went up in value.
Tags: core position, cost basis, money, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, trading stocksRelated posts
Stock Market Basics – The Truth
Here at stock market basics, I try to inform the beginner investor on the things that he/she needs to know if they want to make money. I will posts the things that will help you make the right decisions, but you need to be realistic. At times you will make some great gains, but if you’re not careful you can have some devastating loses. So when you make your move, you need to remember that you won’t hit it big with just one trade.
Everybody wants to hit it big either by playing the lottery, go to Las Vegas or trading stocks, but the truth of the matter is that most people never do. The lottery and the roulette wheel is not the place to putting your hard earned money if you’re looking to make it grow. Let’s be for real, they call it gambling for a reason.
As for trading in the stock market can be a different story. Stock trading is not gambling and should never be treated as such. Like I said, you can make some great gains and double or triple your money, but don’t expect it to happen over night. No one ever becomes rich trading stocks, wealthy yes, rich no (unless you’re Warren Buffet). If a stock that you’re in doubles in value, you are only going to make twice the money you had. So, if you invested $2000 and it doubled, you would only have $4000 after all was said and done.
Don’t get me wrong, when I say that you can’t get rich, I don’t mean that you should even bother investing in the stock market. Quite the opposite, you should be investing in your future as well as teaching your kids to invest in theirs. The longer you’re invested in the stock market the wealthier (and eventually richer) you will become.
Patience is a virtue and to be involved in the stock market, you will need it. Don’t ever treat stock trading as a game because it’s not a game. I enjoy trading stocks and have a lot of fun doing it, even though you will hear some say differently.
Take your time, learn everything you can and be patient.
Tags: beginner investor, investing in the stock market, investor, money, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, stock trading, trading stocks, warren buffetRelated posts
Stock Market Basics 101
I’m sure that since you are at this website, you are new to the idea or you are just trying to get a little refresher course. Stock market basics is a site to help familiarize yourself with what you need to know if you want to succeed in the stock market. Stock trading is not hard to do you just need to take your time and stick to the facts. One other thing to remember is to not to involve your emotions when trading stocks. I believe that is the number one rule in trading stocks.
The stock market is not just one market. When the news refers to the stock market, they typically mean the DOW (Dow Jones Industrial Average), but there are actually several different markets. I won’t list them all, but to name a few. NASDAQ (National Association of Securities Dealers Automated Quotation), S&P 500 (Standard and Poors 500), NYSE (New York Stock Exchange) and the NYMEX (New York Mercantile Exchange).
Stock is a share (piece of the company) unit of ownership. There are two different types of stocks within a company. There are preferred and common stocks. Preferred stocks carries a little more weight in regards to dividends, but not when it comes to voting rights. The preferred shares will receive any payouts before the commons in any bankruptcy issues. In bankruptcy, the commons share are the last to get paid and in most cases, never do.
There are different sectors within the stock market. Each sector represents the different industries in the world. Agricultural, Basic Materials, Commodities, Financial and Energy are just a few of the many sectors. Each one effects another depending on what is going on in the world.
ETF’s and Mutual Funds are a different way to play the stock market. Instead of buying individual stocks of a company, you can purchase into an ETF’s or mutual fund which buys into several companies in one particular sector. The idea is that typically you don’t have to know exactly which stock to own, but to just focus on the sector. This is a good way for beginners to learn how to trade without taking too much of a chance.
In later posts I will go over many of the other things that you would need to know to benefit from trading stocks in the stock market.
Tags: dividend, dividends, dow jones, dow jones industrial average, nasdaq national, national association of securities, new york mercantile exchange, new york stock exchange, preferred shares, preferred stocks, standard and poors 500, stock market, Stock Market 101, Stock Market Basics, Stock Market Basics, trading stocks