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How to Play The Stock Market

How to Play The Stock Market – There Are Many Different Strategies

How to Play The Stock Market

How to play the stock market is dependent upon many factors, including:  an investor’s risk tolerance, the amount of time an investor intends to hold an investment, and an investor’s investment goals, among many others.  How to play the stock market is also influenced by factors such as the age of the investor and the amount of money an investor has to invest.

The traditional way how to play the stock market and a strategy that many investment professionals advise their clients to follow is a buy and hold strategy.  This strategy is just as it sounds, you buy into the stock market and hold until you need to use the money.  The reason why the buy and hold strategy is popular is because over longer periods, such as 50 or 100 years, the stock market has historically returned between 7% and 15% per year, depending up the stock sector that an investor is invested in.  This impressive return on investment includes collecting and reinvesting stock dividends, which can accumulate greatly over time.  However, an investor must be prepared to ride out the occasional stock market corrections to realize significant gains from the buy and hold strategy.

Another popular way to play the stock market and a strategy that is similar to the buy and hold strategy is the dollar cost averaging strategy.  Many people are already using this strategy when they invest in the stock market through their 401-K via mutual funds.  The idea with dollar cost averaging is that an investor buys a similar amount of shares periodically over a period of time and as the market gyrates, the investor will purchase a great number of shares at times when stock prices are low and will purchase a lesser number of shares at times when stock prices are high, thus lowering the average cost of buying shares.  In similar fashion as the buy and hold strategy, the dollar cost averaging strategy requires an investor to hold their stock positions for a long period of time to realize significant gains.

More aggressive investors pursue a number of different market timing strategies.  A market timing strategy involves studying stock market valuation indicators closely, and buying and selling a stock position or an entire stock portfolio based on buy and sell signals.  This strategy is risky and requires a great deal of research and market observance to detect market trend changes that could indicate a buy or sell signal.  For more information about stock market valuation indicators, see:  Advice On Stocks.

How to Play The Stock Market – Other Factors

When considering how to play the stock market and investment strategies, an investor should also consider their age and the amount of money they have to invest.

Generally, younger investors are encouraged to be pursue a more aggressive investing strategy, since they have more time to recover from mistakes and could realize big returns if they are successful.  As investors grow older, they should become more conservative in their investment strategy, which could even mean pulling out of the stock market altogether when nearing retirement age and putting one’s lifetime of investment returns into a safe fixed income investment.

The amount of money an investor has to invest can also influence their investment style.  An investor with a great deal of money may want to pursue an aggressive investment strategy for a percentage of their money, while an investor with a modest amount of money may want to either risk more via an  aggressive investment strategy to grow their money or pursue a more conservative investment strategy to protect the little money that they have.  Ultimately, how to play the stock market is up to an individual’s preference and risk tolerance, but adhering to the widely followed rule of protecting one’s money when nearing retirement age is a good investment strategy for anyone who wants to have their money available during their retirement years.

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Stock Market Advice – Definitions and Strategies

Stock Market Advice – Stock Market Definitions

Stock Market Advice

The best stock market advice is to first understand the definitions of what the stock market is comprised of and to understand basic strategies that are used to make money in the stock market.  The Internet has opened up a wide array of stock market advice that is easily accessible to investors, including stock market definitions and basic strategies, which are outlined below.

The Stock Market is really a collection of stock trading markets, which themselves are comprised of thousands of individual stocks.  The major stock trading markets in the United States are the New York Stock Exchange Euronext (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ).  In 2008, The American Stock Exchange (AMEX), which was considered another major stock trading market, was purchased by the NYSE, and is now a division within the NYSE.  The NYSE and NASDAQ have stringent listing requirements for companies that wish to have their stocks traded on their stock markets.  These requirements include such metrics as maintaining:  a minimum number of shareholders, a minimum bid price for the stock, and a minimum market capitalization.

In addition to the major stock trading markets, tens of thousands of company’s stocks trade on Over The Counter (OTC) stock quotation systems, which include the Over The Counter Bulletin Board (OTC BB) and OtcMarkets.com (Pink Sheets).  Stocks that trade on the OTC BB do not have to meet any listing requirements, with the exception that they must be fully compliant in their reporting to the Securities and Exchange Commission (SEC).  There are no listing requirements for stocks that trade on the Pink Sheets.  However, Pink Sheets has its own tiered ranking system for stocks that trade on their quotation system.  This ranking system segregates companies based on their reporting status to both the SEC and to Pink Sheets.

There are three major Stock Market Indexes that are used to gauge stock market performance, including: the Dow Jones Industrial Average, the NASDAQ Composite index and the Standards and Poors 500 index (S&P 500).  These indexes are comprised of companies that are selected based on their representation of segments of the economy.  The Dow Jones Industrial Average index focuses on industrial companies.  The NASDAQ Composite index focuses on technology companies.  The S&P 500 index is a broader index that focuses on a wide variety of companies.

Stock Market Advice – Stock Market Investment Strategies

Stock market advice as it pertains to stock market investment strategies comes down to one basic investment rule that is known as buy low sell high.  The whole point of investing in the stock market is to make money, and to do so you have to buy when a stock is low and sell it when it is high.  To better understand what a stock is and how to value a stock to determine when to buy and sell, see Advice On Stocks – Definitions and Valuation Method.

Understanding how the stock market performs in relation to economic cycles can improve your investment performance.  Many of the best buying opportunities in the stock market occur when the economy is going into a recession and a stock market selloff occurs.  There’s an old saying on Wall Street, “buy stocks when nobody else wants them”.  This is perhaps the best stock market advice of all, since eventually the stock economy will grow again, companies will report growing earnings, and the stock market will respond by moving higher.

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Where to Invest In Penny Stocks

Where to Invest In Penny Stocks Depends Upon Your Investment Style

Where to Invest In Penny Stocks

An investor or trader who is looking to invest or trade in penny stocks has many questions, such as where to invest in penny stocks?  The answer to this important question regarding where to invest in penny stocks depends upon one’s investment or trading style.

If one is a long term investor or a casual investor or trader, then any number of well known brand name stock brokerages such as Fidelity Investments, TD Ameritrade, or E-Trade are suitable for penny stocks investing and trading.  Unlimited shares of penny stocks can be bought and sold online for one flat fee of $10 or less through many brokerages.  These same brokerages also offer a great deal of information about penny stock companies, such as company contact information, company news releases, share structure, filing status, and if they are a Security and Exchange Commission (SEC) reporting company, company SEC filings.

For more active traders, the question regarding where to invest in penny stocks is a bit more complicated.  For additional fees, the brand name stock brokerages offer higher levels of trading services that can greatly aid active traders with getting into and out of penny stocks at specific price points, including Level II Quotes that provide all of the best bid and best ask quotes and the associated order sizes for a stock.  Some even offer proprietary trading products that let one test out penny stock trading techniques.  This level of service is suitable for most penny stocks investors and traders.

For penny stock traders who want even more control over their trades and want to be able to get into and out of penny stock positions at a rapid pace and at specific price points without delay, direct access trading systems (DATs) might be the best way to trade penny stocks.  DATs trades cost more, but the additional order routing control and order execution speed make DATs worthwhile for highly active traders.  DATs make it possible for a trader to route a stock penny stock order directly to a market maker, a specialist, or electronic communication networks (ECNs), which provides much faster order execution than online brokers.

Most United States based brokers that facilitate trading in penny stocks do not allow margin buying and shorting of penny stocks.  Traders that wish to buy penny stocks on margin or short (sell short) penny stocks, should consider opening up an overseas penny stock trading account for additional trading flexibility.

Where to Invest In Penny Stocks – Some Investors Open a Separate Account

Some investors and traders find the easiest way to separate their regular investments and trading in NYSE and NASDAQ listed stocks and investments and trading in penny stocks is to open a separate account.  This provides a firewall between pools of money that have been set aside by an investor or trader for a specific purpose, such as long term investing in listed stocks and investing and trading in penny stocks.  It also helps investors and traders to keep their profit and loss results straight from different investing strategies.  Ultimately, where to invest in penny stocks depends upon one’s level of investing and trading activity and whether they want to separate their penny stock investing and trading from their other investment accounts.

See Also: Why Invest In Penny Stocks?

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