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Age Old Stock Market Tips to Protect and Grow Your Money

Stock Market TipsThe best stock market tips are the ones that have stood the test of time.  While it can be exciting and profitable to ride the latest hot stock market wave, it is a good idea for any investor or trader to keep certain stock market tips in mind when making trading or investment decisions.

All stock market tips can be summed up by one paramount stock market tip:  protect your capital.  No real money is made in the stock market without taking a certain amount of risk with the money (capital) that you put into the market.  However, if an investor or trader takes excessive risk that puts their money at risk of total or near total loss, then the game is over.  The risk to capital should always be considered when making all investment or trading decisions.  Stop loss orders are a good way to manage risk, since they force one to sell when a certain percentage loss is reached, thus limiting losses.  Professional traders and investors manage the risk to their capital by buy using stock options, which limit their loss of capital risk.

In the vein of protecting your capital, stock market investors and traders should always keep in mind this common stock market tip, “bulls and bears make money, but pigs get slaughtered”.  This means that people who trade or invest wisely on the assumption that the stock market is going to go higher or lower make money, but those who take excessive risk with their capital get slaughtered by the merciless stock market.

One of the best ways to protect your capital is to diversify your stock holdings.  While it is tempting to put most or all of your money into the currently hot stock market sector to participate in the gains, time and again this has proven to be a very bad strategy.  An investor or trader should always diversify their stock holdings to limit their risk associated with a steep decline in any particular stock market sector.

Stock Market Tips to Make Money

While the basic strategy in playing the stock market is to buy stocks low and sell them high, there are situations in which it a good idea to buy stocks high and sell them higher.  This is because some even relatively high priced stocks are still undervalued based on forward looking earnings projections, and if the earnings come through as expected, the stocks can surge even higher.

If you are actively trading the stock market or managing your investment, it is a good idea to maintain an awareness of the state of the economy and the economic cycle.  Certain sectors of the stock market clearly outperform during various phases of the economic cycle.  For example, defensive sectors of the stock market, such as utilities and consumer staples, do well during economic downturns, while stocks with smaller capitalizations do well during the first half of an economic expansion.  As an economic expansion matures, stocks with large capitalizations do better, as their profits improve and more money flows into the stock market.  While there are many stock market tips to consider, sticking to fundamental stock market tips that have stood the test of time is a proven way to increase your chances of making money in the stock market.

For more information about the stock market tips, see:  Stock Market Advice and Advice On Stocks.

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