Make More Money in the Stock Market – 7 Steps to Simple Stock Investing
Many people who invest in the stock market want to understand it better. The others hesitate to jump in because it looks like a complex void in the world where anything can happen – not always a good thing! Of course, one of the easiest ways to invest is to put your money in a mutual fund or ETF, just walk away. This method can work, which is signed by many personal financial bloggers. But what if you want to allocate a portion of your portfolio to stocks? Or do you just like to put the market in cash for this purpose?
If this sounds like you, there are some steps that can make the process simpler and more likely to lead to gains. These steps will also ensure that losses are kept to a minimum, and one of the keys to successfully investing in individual stocks. Ideally, I want you to use as many rules as possible. But even if you choose, it will help you become a more informed investor. I trained tens of thousands of people to use these rules all the time.
1) Keep Your Portfolio Sizes Small For each stock you own, you need at least one familiar key event that may affect its price. It is important to know when the company will report quarterly results, as this could have a huge price impact, either upwards or downwards. How many stocks are the correct numbers? Between two and ten. Extensive diversification is hedged – but the funds are hedged, so you do not need to invest in your stock portfolio. The goal here should be to have several big winners, some with smaller gains. For most people, it is best to keep the number of shares in the 5-7 range. If you have less than $ 3,000 to invest in stocks, you may want to limit it to three names
It's easy to see how crucial this rule is. One of my friends has about 100 different stocks in his portfolio. He is often surprised by earnings reports because there are so many stocks out there that he can not regularly track which are canned and should be sold. His investment is too thin, he unnecessarily lost a lot of money. Do not make this mistake
2) Sell it! People do not like to sell stocks. But they are not precious heirlooms, something for life to cherish and honor in your home place. If you make money in a stock, it's faster than Bode Miller downhill, then all means to sell and keep your earnings! If there is a bear market in 2008 and 2009 that tells us, no one knows how long the stock's price may fall, or how long the bounce may take. If your stock starts to fall too far below the point you buy, also sell immediately. Do not let it drop more than 10%.
This is one of my cousins made a mistake: Back in April 2008, she bought a stock called Bois D & # 39; Arc. It has been acquired by Stone Energy Group (SGY). When she bought, the stock traded at around $ 56. It initially rose to $ 73, so she did well, about 31%. But it began to fall from its highs. It keeps falling. But my cousin did not look. She moved to another state and was busy with all the other life problems that occurred, forgetting her stock. bad! When she finally got to check her brokerage account, it was March 2009. Bear market has reached a low point. Her share price fell 96 percent to $ 2.50. She lost almost all of the investment because of neglect to sell a few months ago. 3) Buy only when the market moves higher: When the market tends to go down, it must be very cautious to buy. The idea of negotiating hunting is ingrained in our hearts – and I also agree to find the most favorable price for entering the stock. But if the main index south, avoid the temptation to buy underestimated "gems". A large number of independent studies have shown that most stocks follow the trend of the market, so in general, until the new market to determine the trend after more secure.
You may wonder, how do you know what this trend is, and not rely on someone's hunch? There are a lot of sites and services that tell you whether the price and quantity of the action has sent the market back to confirm the bounce.
4) What is the story? What are the new and different, companies on the map? Is it a new service or product offering a consumer or a business customer? Of course, the real, real company can be postponed, and their prices are not too much. But if you want to seize the better opportunities to make a big profit, look for companies that somehow change their industry, or take advantage of new trends.
Apple (AAPL) has been innovating over the past six years or so – its stock trend is higher. Netflix (NFLX) in the 2008 bear market toilets, but two new developments have increased its income: First, the recession to encourage consumers to seek cheaper forms of entertainment. At the same time, it is constantly improving its streaming video services, which people increasingly demand.
5) View Sales and Revenue: Confirm that the company's fundamentals are already growing, or at least, have been forecast to increase sales and revenue. When companies have new services or demand for products, revenue grows. This will make the profits higher. When the profit rose, more investors poured in and prices rose
Those companies I mentioned earlier have "new" factors? These are usually stocks with explosive returns and sales growth. View Aruba Networks (ARUN) 's revenue growth in the past three quarters, the company listed in 2007: five consecutive quarters of triple – digit profit growth. Compare with Microsoft. Four quarters of the last five quarters saw a decline in revenue. Do not choose Microsoft, but the old company usually can not be the same as the best new company to grow the same level. Recent IPO price increases tend to match basic growth. Where can I find basic data? Start with Yahoo Finance or Google Finance. Both have a stock screening tool that allows you to find the best sales and earnings growth companies.
6) The stock may be too thin Yeah, they're not like most of us in this sense.
Do not load your portfolio with too many diluted trading stocks. Trading less than 400,000 shares per day is usually more volatile. To illustrate this point, let's look at a name that has performed well since the IPO of China Biopharmaceuticals (CHBT) in 2008. It trades approximately 196,000 shares per day and tends to fluctuate significantly in weekly to periodic and in many weeks. Rare stocks tend to be prone to such loose trading, which can be risky. Almost no stock trading, which means that one or two large investors can suddenly dump stocks and drastically lower prices
If a stock trades 1 million shares or more of stock, more sales offer A substantial decline in prices. Institutional investors generally can not go out together and unload thousands of shares. So widely held stocks tend to go more slowly. This lightens your downside risk, but it also limits your upside potential. 7) Diversification in the Right Way : In this case, I am not talking about allocating different amounts to stocks, bonds or options. I specifically talk about your stock portfolio. Very careful to have too many companies that are similar in business
If the sector gets hit with bad news, that could pull too much stock. Or if one of the stocks in the group has a bad earnings report, fear may spread and strike similar companies. So, even though you like ice cream, do not have four different ice cream companies! The same applies to oil and gas transporters, computer manufacturers, and Chinese online game companies – the ideas you get. So these are some fairly simple steps to enhance your stock investment results, mainly by making it less susceptible to falling risks