Strategies For Success in the Stock Market

The stock market can be a challenging especially without expertise and the right kind of information. However, the problem is that many people want to begin with a large investment. The best way would be to start small and increase your investment as you learn.

You can go your whole life without ever buying a single stock. But until you do, you won’t really understand the full potential of investing — and the rewards that come with it. For beginners, mutual funds give you a great way to get your feet wet. With just a few hundred dollars, you can invest in a mutual fund that will give you instant access to thousands of different stocks. The diversification that comes with broad-based mutual funds brings with it a measure of security.

You may still lose a lot if the whole market goes down, but if one particular company gets hurt, it won’t have a huge impact on your overall portfolio. Conversely, though, buying individual stocks can be a lot more rewarding. You can earn far greater returns from individual stocks than you’ll ever find from a diversified mutual fund — if you pick the right stocks.

Sourced from:http://www.fool.com/investing/beginning/investing-strategies-your-first-stock.aspx

Mutual funds provide a good way to learn about stocks. While most business including stock is about risk, it is best to determine the kind of risk you are willing to take in each buy. The following are some tips to make best of the opportunity in stocks.

1.Buy What You Know

Each investor forms their own trading strategies and rules for buying stocks based on personal goals and risk tolerance. Similarly, each investor buys and sells stocks and mutual funds based on what makes sense to them, right?

Not necessarily. The problem is that many investors fall victim to the latest fads on Wall Street and are eager to buy the stocks everyone else is talking about. This is how traders got taken for a ride by the tech bubble, as folks piled into stocks that had not yet turned a profit and with no realistic way to make money.

2.Buy Stocks Great Investors Own

Of course, there is a pitfall to relying on personal tastes alone. It is always valuable to have an outside perspective on your stocks to make sure you are on the right track. Also, if you want a second opinion, why not go right to the top and pick the brains of the best traders on Wall Street?

There is a reason Warren Buffett is a bit of a rock star to individual investors – because his trading strategies and ways to invest money seem almost superhuman. Buffett’s Berkshire Hathaway Inc. (BRK) continually makes timely and very profitable investments. In March, Berkshire showed its stuff yet again in a powerful earnings report as year-over-year results improved, and the stock’s book value was up nearly 20%.

3.Buy Stocks for the Future, Not the Past

Sifting through quarterly reports and past performance for a company can provide insight into the health of a prospective investment. However, whenever you look at these numbers, it is important to realize that they are lagging indicators. When you look for the best stocks to buy, you should put a premium on future growth trends over previous successes.
Consider changing demographics, such as the fact that China is now the #1 automobile sales market in the world thanks to an emerging middle class in the People’s Republic and flagging consumer confidence in the United States during the recession.

success-1093889_1920

4.Buy Stocks with Great Leadership

At the end of the day, the success or failure of a company in large part relies on the leadership and vision of its top executives. Growth comes from the top, not from random successes at a smattering of stores that trickles upwards. When you buy a stock, you have to realize that you are buying its management too.

Consider the successes and failures of Apple Inc. (AAPL) over the last two decades. In the early 1990s, Apple was considered a second banana to Microsoft (MSFT).

5.Buy Stocks with a Clear Plan to Sell

You would think it goes without saying that the purpose of buying a stock is to sell it for a profit, but many investors run out and buy “great stocks” without a clear plan on what their investment goal is and when they want to sell. This can be brutal on your portfolio.

Because after all, what is a “great stock?” Trendy footwear manufacturer Crocs (CROX) was a great stock to buy in early 2007 at $23 a share — but only if you sold by October of that same year when prices were pushing $70, locking in your 200% gain.

Sourced from: http://investorplace.com/2010/06/trading-strategies-rules-for-buying-stocks/#.VmkgztJ97IU

Some Tips for Interested in Invaestors in the Stocks Market

Investing in the stock market can be hard and confusing especially when you are a beginner. However, the experience promises to be an enlightening one as you will learn something new daily.

Investing in the stock market can be extremely frustrating for those who look back on the big rally they missed and nerve-wracking for those who believe the may be putting money into the market at the top.

Sourced from:http://www.businessinsider.com/dollar-cost-averaging-into-a-stock-crash-2014-2

Each investor knows that business is all about risk; in the stock market, you have to take risks no matter how frustrated you may feel each time you fail. There are some strategies that promise to make you one a stock guru in time. The strategies vary depending on the type of investor that you are;

1.Buy and Hold

The “buy and hold” approach to investing in stocks rests upon the assumption that in the long term (over the course of, say, 10 or more years) stock prices will go up, but the average investor doesn’t know what will happen tomorrow. Historical data from the past 50 years supports this claim. The logic behind the idea is that in a capitalist society the economy will keep expanding, so profits will keep growing and both stock prices and stock dividends will increase as a result. Two additional benefits to the buy and hold strategy are that trading commissions can be reduced and taxes can be reduced or deferred by buying and selling less often and holding longer.

2.Market Timing

Market timing is essentially the opposite of buying and holding. Market timers believe that it is possible to predict when the market, or certain stocks, will rise and fall. It therefore makes sense to buy when the markets are low and to sell when they are high in order to maximize profits. Market timers can use any number of different methods for timing the market – analysis, fundamental, or even intuition.
Most experts agree that market timing is incredibly difficult if not downright impossible. They also warn against it because:

  • It’s hard to say when the market or a particular stock is “high” or “low”; often a seemingly high stock will go higher, and a seemingly low stock will go lower.
  • Commissions eat away at your profits when you trade frequently, especially on small transactions.
  • The bid/ask spread also eats away at your profits, especially for thinly traded stocks.
  • In the long run, the market goes up. Unless you’re a superb timer, you’ll do better staying fully invested at all times. For example, in the last 40 years, the market returned about 11.3% annually. If you were fully invested the whole time, but got out completely for the 40 best months, your annual return would’ve dropped to 2.7%. If you miss the big moves it hurts, and no one really knows when they’re coming.

silhouettes-816492_1920

3.Growth

4.Growth investors focus on one aspect of a company: its potential for earnings growth. They believe that companies with high earnings growth will see their stock price continue

to increase, since investors will want to own profitable companies that can pay large dividends in the future. The number that they pay the most attention to is earnings per share, especially how it changes from year to year, although they sometimes look at revenue growth as well. Some investors also compare the price/earnings ratio with the annual earnings growth, to get a feel for how much the market is willing to pay for a given rate of earnings growth. Growth stocks tend to be from young companies, so they are often riskier than the average security. They have the potential for large gains, but they also have the potential for large losses. In the 1990s, technology stocks were the most commonly purchased stocks by growth investors, although growth stocks can exist in just about any industry.

5.Value

Value investors look for stocks that are selling at an attractive price; in other words, they are bargain hunters. This does not mean that value investors buy stocks because they are “cheap” (such as penny stocks); value investing utilizes several measures of a company’s value to identify stocks that can be purchased for less money than they’re worth, regardless of whether they’re worth $10 or $100. Although it’s possible that a growth stock could represent a good value, growth investing and value investing are usually considered opposing strategies. This is because value investors tend to focus on traditional valuation metrics such as the P/E ratio, looking for low ratios, which are typically not found in growth stocks.

Value stocks often are ones, which have fallen out of favor with the investment community for one reason or another, perhaps because they are in a slumping industry or because they reported poor earnings.

6.GARP

If you’re torn between the growth approach to investing in stocks and the value approach, then you might want to consider trying the GARP approach. GARP stands for “growth at a reasonable price” so, as you might expect, GARP investors look for companies with growth potential whose stock price is undervalued.

That can be a difficult task since growth and value stocks tend to have opposing characteristics, but it’s not impossible. Most GARP investors look at the price-to-earnings-growth ratio (PEG) ratio in order to find bargain stocks with growth potential that are selling at a reasonable price.

7.Warren Buffett and Quality

Some investors prefer to consider themselves not ‘value’ or ‘growth’ but ‘quality’. This is a sort of hybrid approach in which the investor is searching not for questionable companies at bargain prices or exceptional companies at outrageous prices, but good companies at good prices. This strategy relies on a combination of quantitative and qualitative factors.

Sourced from: http://www.investorguide.com/article/11634/common-stock-strategies-part-1-buy-hold-timing-growth-value-igu/

What You Should Know About Investing in Stocks

We all have the names of people who are now billionaires as a result of the stocks market. However, when an average individual invests in the stocks market; they seem not to have similar success. The gap is because of understanding of the stock exchange itself.

When you own a share of stock, you are a part owner of the company with a claim — however small it may be — on every asset and every penny in earnings. As a company’s earnings improve, investors are willing to pay more for the stock.

Sourced from: http://money.cnn.com/pf/money-essentials-stocks/

A stock allows an individual to become the part owner of a company, business, or enterprise. Luckily, we have got you covered with some basic knowledge needed to make it in the market.

  • First: Be fast

Downturns occur quickly. Therefore, investment success requires speedy shifts. Waiting for more information or for the dust to settle are common traps for being caught in the downdraft, and then missing out on low-priced opportunities.

  • Second: Reject “sophisticated” risk reduction strategies

Following a sharp drop that falls well below the “buy on dips” level, a typical reaction is to reduce portfolio risk by investing in alternative strategies, funds, and issues. Wall Street’s and advisers’ attempts to fulfill this desire typically end up producing confusion and disappointment.

The key problem is trying to allay down market worries while staying fully invested. Currently, Wall Street and advisers are offering “lower risk” solutions that include “low-vol” (low volatility), “alternative,” “hedge fund-like,” and “option strategy” funds and approaches.

  • Third: Invest in some cash

success-1093891_1920

When stocks or bonds produce losses, cash is the clear winner. Additional benefits from holding cash are:

A calmer demeanor that allows making better decisions and avoiding emotionally driven mistakes

The funds for buying attractively priced investments

That last point is especially important. The best route to investment success is to buy low, but that takes cash.

  • Fourth: Reduce importance of stock fundamentals

In normal times, forward earnings and growth potential are important fundamental stock measures. In bearish times, however, they become weak – not because they are ignored, but because the concerns and uncertainties around the fundamentals reduce confidence in the numbers, themselves. Moreover, economists and analysts are slow to adjust to a negative outlook scenario.

  • Fifth: Avoid screening for stocks to buy

There are insurmountable problems to performing screens in downtrends.

Earnings and growth data are unreliable, as described above. Importantly, they will be just as unreliable at this down market’s bottom, wherever that may occur.

Higher dividend yields (currently being used in articles recommending stocks) are questionable. Stocks are still being analyzed individually, so higher yields mean higher risk. For example, Chevron CVX +1.15%’s 5.7% yield makes it a popular recommendation (JPMorgan just upgraded the stock). The yield is high because oil prices are well below Chevron’s business-based projections. With large capital outflows committed through 2017, there has been little left over for dividends.

Low price picking has bad rationale (e.g., looking for stocks well below their 52-week highs and/or 200-day moving averages). The problem is that we are in a bearish period, and that necessarily means prices are going to be much lower than they were. To screen on “price lowness” is to presume either that those higher prices are still valid valuations, or that some stocks are down too much. Neither is a proper assumption.

Sourced from:http://www.forbes.com/sites/johntobey/2015/09/14/what-investment-strategy-is-best-in-this-stock-market/