Stock Market Tips - VI
Investment is the foundation of financial success. However, as it opens the way for unlimited fortunes, it can also lead to grave misfortunes. It all depends on how astute you were in your investment endeavours.
The stock market has been claimed to be a haven of treasures and wealth, but it can also be a chasm of monetary loss and sheer dearth. It all depends on how well you play your game. How well do you understand the rules and how well can you abide and apply them in your decision making.
There are few don'ts in the rules that should be taken seriously, so that you will prevent yourself from being badly burnt in a deal.
Never invest in a market the amount of money that you cannot afford to lose. If you are the type that cannot handle the risk involved in stock trading you are advised to steer clear of it completely. Because, it is most likely that you will lose (probably many times before you can actually make it big, by losing you will learn from your mistakes and get better enough to beat the stock market at its game).
So, be willing to avail yourself the amount that you can relinquish to the ‘treacherous' stock market, but also be willing to open several new bank accounts in your name, for by the time you are good enough to start making profits, you may become scared as to the sheer greatness of the amount of money you start to make without the hassles you were involved in as a newbie to the grand scheme of stock trading.
Whatever company you are trying to invest in, you should first understand the way they operate their business. Know the past and the present financial achievements as well as losses, also understand their entire strategy of trade, in short just understand the way they make money. You can do this by reading their Annual Report or 10-k; you can also have a thorough insight into their earnings by attending the various conferences they hold in which they invite shareholders. By the time you understand their system, you will be able to predict the rise or fall in the value of their stocks.
A good way of investing in the stock market is by practicing DCA (Dollar Cost Averaging). By doing this you will be investing the same amount in a particular stock at regular interval in spite of the price of the stock at that point in time. DCA will enable you to maintain a position in a particular stock at a level you will be comfortable with. This may help you from making mistake by predicting wrongly in a particular stock and investing heavily on it, only for the stock to plummet in value and usher in financial loss.
I will end this with a valuable stock market quote, "Buy on the rumours and sell on the news." It has been noticed that when the value of the stock of a particular company is about to increase. Its price starts to increase before it is officially announced. If you buy on the actual date it was announced, you are definitely not going to make best of the opportunity. So it is best to buy on the rumour. However if the market predicts bad news for a particular stock, it is best to sell on the news, especially for traders who do not own stocks for a long time.
