Chapter 1: Investing In Stocks
Chapter 2: Risks Associated With Investing In Stocks
Chapter 3: Stock Investing Tips
Chapter 4: Where To Actually Invest In Stocks
Here are a few important tips that you should keep in mind when investing in stocks:
Build a Diversified Portfolio
A well balanced stock portfolio must have at least 15 to 20 stocks from at least 5-7 major industries. Consider the company’s historical performance when you want to hold your stock for the long-term. Include stocks with above-average growth rates and subdued valuations, and always avoid high-risk stocks.
Research Target Companies
Before investing in stocks, research on the companies you’re interested in. Here are a few documents you should look up before buying a company’s stocks.
Companies that trade publicly are required to file Form 10k with the Securities and Exchange Commission (SEC). This document, which contains the necessary information about a company, is available to the investors who want to buy that particular company’s shares. As an alternative, you can also take a look at the 10Q, a shorter version of the 10k that is filed quarterly.
As per the government rules, companies submit the Proxy Statement, containing the details of its board of directors, for investors to read.
You can also check the company’s latest annual report that is usually available on the company’s corporate site.
You can also get all the financial information of a particular stock by subscribing to a reliable financial research company.
Profiting from Short-Term Stock Investments
Holding your stocks in a diversified portfolio for long term can be the best option for a conservative investor, but if you are looking for high risk – high return investments, you would have to trade more frequently. Here are a few strategies that allow you to make a quick dollar when you sell your stocks within a short period.
Buying on margin –Buying on margin means that you only pay a fraction of the stock value, while the broker lends you the remaining amount. When the price of that stock increases, you can sell it, pay the balance amount to the broker and make a profit. But remember that purchasing stocks on margin can be risky in case the stock prices fall.
Selling Short – Selling short is a risky but potentially lucrative approach to making profits in a bear market. An investor, who expects a particular stock’s price to fall, borrows it from the broker and sells it in the market. The idea is to replace the borrowed stock, after buying shares for less from the open market. However if the investor’s guess is wrong, he could end up with huge losses.
Next Chapter: Where To Actually Invest In Stocks