Posted on 04 July 2012.
As a beginner, the first thing you should know is that a thorough answer to the question, how to make money in the stock market, could fill volumes. There are investors, investment bankers, brokers and companies everywhere, working round the clock, trying to find the best answer at any given point of time. As any of them would tell you, this is not a game where you crack a code and double your returns every three months. Rather, you need to be prepared to work patiently and invest both time and effort before you start measuring your success.
Beginners often gravitate towards penny stocks and other risky futures, in the hope of making quick money. However, without investment experience, it is almost impossible to predict the success of companies that do not have a history and credentials. As someone new to the idea of investing, you would be a lot better off putting your money with listed companies that have a solid background. The returns may not be stunning, but you will not lose any money while you learn the ropes.
Before you place your money with a company, learn not to be misled by people’s biases and loose talk. Examine any given company’s leadership and performance trends thoroughly. Consult their balance sheets, check profitability indicators and see what kind of decisions the people in-charge have made. It is also a good idea to keep yourself abreast with economic and socio-political trends. Often, external factors have a major bearing on a company’s prospects.
Hiring a Broker
A lot of people think that there is, in fact, an easy answer to the question, how to make money in the stock market – hiring a broker. However, hiring a broker is the same as investing in a professional’s expertise, and professionals fail all the time. Do not place blind faith in your broker’s word. Rather, pay attention to his guidance, understand his rationale, and then examine first-hand whether he is giving you the right information about companies and making reasonable predictions. If you find your broker is genuinely competent, do your best to establish a sound long-term working relationship and learn as much as you can.
Ultimately, you need to accept that when it comes to answering the question, how to make money in the stock market, patience is the key.
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