The first rule of the investment is ‘Don’t lose money!’.

It sounds easy but when it comes to investing in shares, how do you ensure you do not lose money?

Infact, you will find out during the first few days/week of your investment purchase. If the share price go up, congratulation. If it moves sideway or down, it means capital tied down and this can mean your money is tied down for few weeks or months. Some investors may sell their shares to cut loss hence it means physically money loss. Many investors rather hold on to their not performing shares and it means paper loss and it will cause opportunity cost. They cannot use that money to buy other rising stocks.

The first step of investment is very crucial as it will determine whether you make profit or suffer losses. Does it right the first time and the rest will be safe if there is no major crisis happening in the macro economic environment.

From years of experience in shares investing, i have found it is possible to protect the initial capital but needs lots of discipline to ensure the money is safe.

Follow the few steps and hopefully it may help you safe guard your investment and make lots of profit.

Always invest in amazing industry that mean something to you. That mean business that you know and will still be around in the longest time. Some good industries are food, drinks, Oil, Banks, Financial, Airlines…etc. Do research and study their potential in the next 5 to 10 years. Some industries are around since many many years and will still continue….get it?

When buying shares, it is not just buying a share! It is investing in a business or company that you want to see it grows and make profit for the longest period of time. Always have a investment time frame of holding it for 5 to 10 years.

During the trading, don’t buy when the price is going up. This is a scenario when many shares have traded, lot of people are snatching and chasing the share price skyrocket up. Reason being you do not know the reason behind the rising share price. It could be other big instititutions are off loading the shares and investors just buy blinding. It can be ‘rumours’ that is spreading that the company is in some form of ventures or profit gained.

Always do your research before buying, there will always be enough time to buy not soon but maybe later.

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Investing in stocks is not like playing a game of blind man’s buff; neither is it a matter of trial and error. If you leave your earnings to chance or luck, you are more likely to lose than gain.

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If you want to make money from stocks, you must draw a carefully considered plan. You have to create a stable, long-time, profitable investment strategy. Your broker may have provided you with certain investment tools and facilities, which may include low commissions, automatic investment plans, low cost real time trades, various research tools and easy account management. You can make use of these tools and plans to devise your strategy.

You have to develop your strategy on the basis of your objectives. First of all, you should decide your objectives for investing in stocks. Do you want to invest in stocks to create an additional source of income? Do you want to make it a full-fledged source of income? How much do you want to earn per month? Are you a long term or a short-term investor? Above all, what is your budget and how often can you comfortably invest? If you were a salaried person earning, say, $3, 000 per month, it would not be a good idea to invest $ 500 per week. Just decide upon an amount that you can afford easily without having to stretch your resources too far.

Diversify your stock investment

‘Never put your eggs in one basket’ is a time-tested adage. Stock market offers numerous options. Therefore you should follow the concept of diversification in stock market also. Diversification in this context means spending your investment across different sectors and funds. If one sector shows poor performance, your entire investment will not be affected adversely. The risk exposure to a particular investment would be reduced and over all risk to your portfolio will be considerably minimized. To explain it, let us say you have invested $1,000 in one stock and the prices of your stock fall, you will be losing a substantial part of your investment. If, however, your investment is distributed over a number of stocks, you may gain in some other stocks. Thus your losses will be neutralized to some extent.

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Invest in ETFs

The best and the most popular options are the low-cost index tracking exchange-traded funds-ETFs. The ETFs are, in fact, securities that track an index or follow the performance of a group of stocks. They trade like regular stocks. The only and the important difference is that you have to pay minimal expenses for trading. It is, therefore, convenient and cheap to buy and sell the ETFs. Since they follow indexes like the NASDAQ 100 or the Standard and Poor 500 to track a bunch of different stocks, they are automatically diversified. The great benefit of buying ETFs is that you can actually buy hundreds of different stocks with every dollar you invest. You have to pay your broker only a low cost investment plan fee that ranges from $1 a trade to $3 a trade.

Fractional Shares

If you think you cannot buy high priced stocks because you are intimidated by their high prices, you may consult your broker. You may be offered a plan in which you can buy fractional shares. In fractional share investing, you need not buy 100 shares or even one share. You can buy just a fraction of a share. Therefore you can invest absolutely any dollar amount with no minimums and buy any quantity of a stock or ETF. You can buy a thousand shares or one-tenth of a share through automatic investment plans.

You can buy expensive stocks with small investments. Let us suppose, a stock is trading at $200 and you can afford to invest only $50 per week. If you use the automatic investment plan offered by your broker, you can buy any fraction of a share at a cost as low as $1 per trade. In this way you can invest in stocks of over 500 companies with only a few dollars by buying fractional shares of an ETF or any stock for that matter. This is really a revolutionary concept in stock trading.

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A beginner usually feels very attracted to the stock market while for example discovering a new stock that’s being reported in CNBC or the news program and watching it rise steady fast and make new highs from $1 to $7 in just 2 months.

While learning about this successful news story he’s saying to himself “Oh boy if I was one of those lucky guys who bought that cheap stock back when it was priced at $10 I easily would have tripled my money by now… That means my 10 grand would transformed in to a whooping 70 K! hassle free … I would have been able to grab one of those big HUMMERs on the spot and probably pick up a nice Rolex by the way!”

The stock market news constantly reports of hot small cap stocks that are breaking out and making tremendous gains on the same day or doubling in price in just a few hours. Back in the bull market of the late 90′s you could easily see a good number of hot stocks sprouting out every week.

Those years surely made it look like every body could easily take LONG SHOTS and make a shiny pile of gold every day in the stock market. But today’s market is a different story. A totally different animal.

Some say that the stock market has gotten more realistic. Fantasy land is over and GAMBLING YOUR WAY TO RICHES is not an option anymore. You might get lucky a few times, but your constant loses can wipe you out sooner or later.

The fact that the bull market period has ended for now doesn’t mean that you can’t make a great deal of money in today’s market. A lot folks from many walks of life keep making excellent profits on a daily basis, pocketing hundreds & thousands of dollars by trading penny stocks online.

Success in stock trading starts by applying a wiser and REALISTIC methodology for choosing hot penny stocks as well as for getting in and out of them with profits in mind.

You need to look at the stock market more realistically. You got to learn that you can benefit when stocks go up and also when they FALL down.

You got to WORK SMARTER and get more selective about the hot stock trading opportunities that you choose. You need to embrace the nature of day trading and be fully prepared to take advantage of stocks that are poised for a BIG RISE on the same day.

The bottom line is you have to PREPARE YOUR SELF to be successful, just like you would do it in other areas of your life in order to achieve success.

Investment involves staking capital in an enterprise, with the expectation of profit. It is nothing but the use of liquid funds to gain income or increase capital. In order for money to grow, investors need to invest judiciously. There are certain guidelines to be followed to avoid major mistakes.

Price of the Company: An investor needs to research on the ‘Market Capitalization’ of the company he is planning to invest in. Market Capitalization or Market Cap is the total cost of acquiring the entire company. It refers to the price of all outstanding shares of a company multiplied by the quoted price per share, at any given point of time. It is important to gauge the relative cost of a stock, before making any investments in the company. This can be done by learning the ‘P/E Ratio’. P/E ratio refers to the Price is to Earnings Ratio. It is the ratio of a company’s current share price to its earnings per share.

P/E Ratio = Market Value per Share

Earnings per Share (EPS)

Example: If a company is trading at $50 per share and earnings per share over the last 1 year were $ 2 per share, then, P/E ratio for this company’s stocks would be $50/$2, that is, $25. High P/E value indicates that the company has high growth prospects in the future.

P/E ratio can be used to make important investment decisions, by comparing P/E values of various companies.

Is The Company Buying Back Shares: It is very important for investors to observe the per-share growth of a company. A company may not show considerable growth in sales, profit and revenue for a few consecutive years, but could generate large returns for investors by dropping the total number of outstanding shares.

Investment Policy of the Investor: An investor needs to have valid reasons for investing in a particular enterprise. Investment decisions should be solely based on the authenticity of a company. Authenticity, here involves the reputation of the company, its management, profits earned, market cap and other such fundamentals, related to economics and finance.

Long Term Goals of the Investor: Investment involves risk but intelligent planning of long-term goals makes investing safe. An investor needs to select a good company that requires him to pay the minimum possible amount initially. He should consider the ‘Dollar-cost Averaging Program’.

Dollar Cost Averaging Program: This involves investing a particular amount in the same investment, periodically. Investors need not invest a lump sum amount in a stock all at once. They can invest a little every month in the same stock. Since an investor puts in the same amount of money, he can purchase more shares when the prices are lower. This basically lowers an investor’s average cost per share in comparison to the average market price per share, in the same time period. Dollar cost averaging builds the habit of setting aside money for investment.

Reinvesting the dividends, to grow over a long period of time, often proves highly profitable. An investor should look for all valid essentials of an investment before investing.

President Barack Obama has signed legislation to increase the US debt ceiling and avert a financial default, after Congress voted in favour of a bipartisan compromise deal.

The bill cleared its final hurdle in the Senate by 74 votes to 26, after negotiations went down to the wire.

It raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn, and makes savings of at least $2.1tn in 10 years.

But the bill’s passage failed to lift financial markets.

On Wall Street stocks ended Tuesday down by more than 2%, amid poor consumer spending data for June.

Japan’s Nikkei index followed suit, finishing Wednesday morning down by about the same amount.

Moody’s rating agency reacted to the bill by placing Washington’s AAA credit score under a “negative outlook”. Chinese credit agency Dagong downgraded its rating of the US from A+ to A, Xinhua news agency reported.

The bill’s signing came just 10 hours before the expiry of a deadline for Washington to raise its borrowing limit, after drawn-out talks between Republicans, Democrats and the White House.

Without a deal to raise the debt ceiling, the US would have been unable to meet all its bills, the treasury department had warned.

Speaking at the White House shortly after the decisive vote in the Senate, President Obama said it was “pretty likely that the uncertainty surrounding the raising of the debt ceiling for businesses and consumers has been unsettling”.

“It’s something we could have avoided entirely,” he added.

The president said more action was needed, saying it was impossible for the US to “close the deficit with just spending cuts”.

He urged Congress to now look to boost the economy through measures to create jobs and increase consumer confidence.

“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” President Obama said, reprising one of his key themes of recent weeks.