Don’t lose money in shares investment
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.
Want to learn more Don’t lose money in shares investment… please follow my website at www.sharesmarketguide.com
Many years of experience in shares investment. Weathered many crisis and encountered few bull runs.
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Successful Stocks Investment Strategy
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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Things to Look for in An Investment
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.
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