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Stock Market Investment Advice

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Basic Stock Market Investment Advice

Stock Market Investment AdviceStock Market Investment Advice can be  confusing since there is such a large variety of investment advice that is  available to investors.  Understanding  basic stock market investment strategies is the best way to make money in the  stock market.

The first and foremost Stock Market Investment Advice is to understand that there is asignificant difference between trading the stock market and investing in the  stock market.  Trading the stock market means one is expecting something imminent to occur in a stock or in the overall stock market, and involves quickly initiating and then closing a position in a stock or a stock market fund, based on the expected imminent event.  Trading is not investing.  Trading is a form of speculating, and therefore is not the focus of this article.

Investing in the stock market involves a long term commitment to investing in a stock or stock market sector, which can be done by buying individual stocks or funds that represent a sector of the stock market, such as large capitalization stocks like General Electric or diversified oil company stocks like Exxon Mobil.  Funds, which include mutual funds and exchange traded funds (ETFs), spread the risk of owning stocks by holding a number of stocks, and can include a wide variety of market sectors.  Investing in the stock market requires adequate due diligence to understand a stock or stock market sector, prior to making an investment.  Once an investment is made in a stock or stock market sector, adequate time should be allowed for an investment to reap the rewards of the investment.

Stock Market Investment Advice: Spread The Risk

Buying individual stocks or buying stock market funds each include advantages and disadvantages.  Buying individual stocks is inherently risky, since nobody knows which stocks will do well and which stocks will fail in the long run.  Even stocks that are thought of as rock solid, occasionally fail, such as AIG Insurance.  To avoid such risks, stock market investors can spread their risk out amongst a number of stocks by buyingmutual funds and ETFs that represent a sector that they have researched and want to invest in.

  While buying funds is a good way to protect one’s investment capital from total loss, it also will likely limit one’s investment returns, since not all of the stocks held by a fund will do well over time.  For example, if an investor buys a mutual fund or ETF that invests in Internet companies, the returns will be reduced by companies that the fund holds that fail or have subpar performance.  For this reason, some investors prefer to buy individual stocks.  Over the past decade, Internet stocks such asAmazon or Google have experienced much larger gains than funds that hold abasket of Internet stocks.

Stock Market Investment Advice – Know Your Goals

The most basic Stock Market Investment Advice is to know your goals for the money you are investing in the stock market.  If you need the money for something over the next five years, perhaps the stock market is not the right place to invest the money, since the stock market is inherently volatile.  If you have a long term investment horizon of ten years or greater, then buying into the stock market when it is in a lull
will likely pay handsome returns in the long run, as the economy grows and corporate profits increase, which in turn increase the price of stocks and the stock market indexes.

The Internet contains a great deal of stock market advice regarding a wide variety of investment strategies.  Websites such as offer reliable investment information concerning investment terms and strategies that someone new to investing might not be familiar with.  For more detailed Stock Market InvestmentAdvice, see:  Stock Market Advice – Definitions and Strategies.

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