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Stocks_-_Getting_Started_In_The_Market

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Stocks - Getting Started In The Market


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616


Summary:
Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-
trading, devious power brokers making back room deals; it all makes for great drama. Then you have the
true-to-life stock market stories in the news: insider trading, big money IPOs, the dot com bust. All of it is
enough to make you steer clear of the market for good and travel down a safer investment path. But don’t be
frightened, history shows that long-term, there’s no b...



Keywords:
invest, stocks, shares, tips, investment, wall st, options, trade



Article Body:
Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-
trading, devious power brokers making back room deals; it all makes for great drama. Then you have the
true-to-life stock market stories in the news: insider trading, big money IPOs, the dot com bust. All of it is
enough to make you steer clear of the market for good and travel down a safer investment path. But don’t be
frightened, history shows that long-term, there’s no better place to put your money to watch it grow. Here
are a few tips to get you started.


Stocks 101


Simply put, when you purchase stock in a company, you become part-owner of that company. Along with
other shareholders, you all combine as investors in the business, and therefore reap its rewards, or suffer its
losses. Stocks are most commonly divided into separate categories depending on the size and type of the
company (e.g., mid-cap, small-cap, energy, tech, etc.).


While speculation can drive stock prices in the short term, it’s long-term company earnings that determine a
stocks gains or losses. Speaking of short term, that’s when stocks are extremely volatile. Over a span of just
a few months or years, stocks can climb to astronomic heights or drop to pitiful lows. But, since 1926, the
average stock has returned over 10 percent per year. That’s better than any other investment vehicle out
there, and that’s why stocks are your best bet for long-term investment.


Picking Stocks
Before you dive head-first into the market, there are a few things you should know about picking stocks.
First, the market’s performance as a whole is not necessarily a reflection of its individual stocks. Good
stocks can keep growing even in a down market, while bad stocks have the frustrating tendency to drop or
remain stagnant in a strong market.


Also, remember that history is not indicative of a stock’s future performance. Even solid stocks can slip
from time to time. Remember that stock prices are based on a company’s earnings outlook, not its past
performance. If the future looks bright for a company, a $100 dollar stock is probably a good buy. If
earnings look less than promising, even a $5 stock can be a waste. Finally, investors determine a stock’s
value by measuring a handful of primary criteria, most notably cash flow, earnings, and revenue.


“Diversify”


It’s the rallying cry of all smart investors. When compiling an investment portfolio of stocks, it’s smart to
own shares in companies from several different industries. Consider it a “hedge bet”. When one part of the
economy experiences a downturn, you’ll have other stocks in your portfolio to put your faith in.


When building your portfolio, the safest bet is to pick from financially strong businesses with earnings
growth above the average. Surprisingly, that limits the lot to choose from, as only around 200 stocks today
fit that bill. A solid portfolio features somewhere in the ballpark of 20 stocks selected from seven or more
industries. A general rule of thumb is to invest in stocks with an above-average rate of growth and
reasonable valuations.


Buy and Hold


Day trading is a great way to lose your nest egg, but quick. As we noted before, stocks over the short term
are highly volatile. Sure, brokers today are offering cheap trades, but beware. There are a ton of hidden fees
and taxes involved with day trading, not to mention the amount of attention required by you to monitor the
blow-by-blow proceedings of the market. Our recommendation: buy and hold. A ten percent return over the
long term is nothing to sneer at.




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