Wednesday, May 11, 2011
Stock Investments For Beginners
By A. Hamid Adeniyi Otule
The Aims and Objectives of this writing are to expose to you our esteemed readers one of the most possible, tested and confirmed ways to invest in stocks and share.
Stock investment as you all know requires experience in the stock market. You don't need to pick stocks on your own or take on excessive risk to invest in stocks.
With the view to enhancing a better stock trading ability and chances for success, I therefore present to you a basic starter guide to stock investments for beginners.
Firstly, what you need to know about the stock market when you make your first stock investment is that stock prices fluctuate. Stocks trade on exchanges, and historically when held for the long term stocks have produced returns of about 10% a year. Over the shorter-term the market goes through cycles called bull markets (rising prices) and bear markets (falling prices).
Firstly, it is important to note that when you make your initial stock investments, stock prices fluctuate depending on the period, be it; short- i.e. when the market goes through cycles called bull market(rising prices) and bear markets (falling prices) term or long-term. If properly managed can make returns for at least 10% returns on investment.
In addition, most of the time, bull markets prevail and investors make huge returns. In bears markets the vast majority of investors tend to lose money, as most stocks fall in value.
Beginners who are just investing should try to pick stocks that they feel will outperform the stock market. They should be worried about making it big in stock investment without speculating and taking unnecessary risk.
I want to assure you of the simplest way to invest in stocks without speculating, which is to invest in investments funds such as: exchange traded funds (ETFs), and mutual funds. Well In both cases you make a stock investment by buying shares. You then own a small part of a large portfolio of stocks which is managed for you and all the other investors who own shares.
To invest in stocks through an ETF you'll need a brokerage account. Moreover stock mutual funds can be purchased in various ways: through an investment professional, in a 401k-type plan, in a brokerage account, or by dealing directly with a no-load fund company.
Unless you have an investment adviser you'll need to decide the funds to invest in. As a general guide to investing for beginners, I suggest you start investing with a major stock index fund.
Furthermore, For example, stock symbol SPY is an ETF that tracks a major stock index, the S&P 500 Index. Various mutual fund companies offer S&P 500 Index funds as well. In either case, they are a stock investment that tracks the performance of 500 of the largest stocks (large cap stocks) in a country like America.
In good times in bull markets, you'll make money. In bad times and bear markets such as in 2008, expect to lose money along with just about everyone else who decided to invest in stocks.
Are you scared! well the good news about stock investment index fund that tracks the stock market: most of the time stocks go up in value. Plus, unlike people who pick stocks to beat the market, you don't need to sweat the possibility that you chose poorly ... resulting in larger than average losses.
Am sure by now you know where to invest in stocks to participate in the stock market without undue risk, you'll want to learn about investment strategy. Once you learn how to avoid major losses in bear markets, you're way ahead of most investors.
In conclusion, If the average stock investment has made 10% a year over the long term (and it has), think of the possibilities if you really knew how to invest.
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I wish you best of luck.