Stock Investing Basics
Many new investors and traders are always looking for different ways to beat the stock market, but the truth is that if you can learn the basics and study the trend of the markets, that all you really need to know to make it in the stock market. What are the stock investing basics? Well there are quite a bit of them, but I will try to give you just some of them in this post.
One of the key thing you need to know before you start trading stocks is that you need to do research on each of the companies that you want to invest in. You can’t just say I like a particular stock and buy shares of the company. You have to know if the company is doing the right thing and making a profit. Is the Chief Executive Officer (CEO) a successful businessman? Does he have what it takes to make the right call for the benefit of the company and it’s shareholders? Is the industry that the company in on an upswing or head in a downward motion? A company can be doing the right thing, but if the industry and it’s competitors have a bumpy road ahead of them because of the economy, it’s most likely that they may suffer along with the rest of them. Of course that is not the case all the time, but it can play into the price of the company’s stock.
When you go to build a position in the company, you must do it incrementally. You have to figure out how much you are going to invest in the company (usually no more than 20% of your portfolio). Buy 20% first just in case the stock pulls back a little. After a healthy pull back (typically 5-8%) you invest another 30-50% of your total investment in the company. if it continues to pull back, well then you buy the remaining shares to help lower your cost basis ( average price per share).
Another Stock market basic you need to realize is that there is no sure thing as a good stock tip. If anyone has inside information on a certain stock, they wouldn’t be telling you. It’s against the Security Exchange Commission law to divulge any information that could give anyone a leg up on the other investors. Martha Stewart went to jail for insider trading within her own company.
In future posts I will list a few other stock investing basics to help you get better and to make more money in the stock market.
Tags: cost basis, investing basics, investment, investor, security exchange commission, shareholders, Stock Investing Basics, Stock Investing Basics, stock market, Stock Market Basics, stock tip, stocks, trading stocks