Tag Archive | "stock market"

Why Long Term Investors Should Invest In The Stock Market


Why Investing In The Stock Market Makes Sense

Stock MarketMany investors have shied away from investing in the stock market in recent years. This is primarily due to the poor performance of the stock market since the year 2000 and the severe stock market sell-off that occurred during the 2008// 2009 financial crisis. While it is a good idea to maintain a healthy amount of skepticism about the stock market and not get caught up in stock market mania, keeping all of one’s investment money out of the stock market entirely is not a good long-term investment strategy.

The fact of the matter is that despite the stock market’s poor performance since the year 2000, over the long run (i.e., decades), money invested in the stock market provides better returns than just about any other long-term investment vehicle. If one is investing for retirement that is thirty or forty years in the future, the stock market on average can be expected to provide 7% investment returns by just investing in index stock market funds.

How To Increase Your Long Term Stock Market Investment Returns

There is a simple strategy to increase long-term stock market investment returns. While over long periods of time the stock market generally rises, the chances of successful long term investing can be increased by investing in dividend paying stocks. This is because no matter what the overall stock market does over short periods of time, dividend paying stocks pay investors returns on their investments. The money earned from dividends can be held in an interest earning account, invested in other investments, or reinvested in the stocks that are paying the dividends. Reinvesting dividends into dividend paying stocks is an excellent way to increase long-term stock market investment returns, because the money is invested on a dollar cost averaging basis and the dividend payouts increase over time as more dividend paying stock is held. Even when the stock market is in a slump, additional shares are purchased from the dividend income, which can be expected to eventually rise in value, as the stocks and stock market increase in value over long periods of time.

Since long-term stock market investors need not be concerned with the short-term gyrations that the stock market goes through, they can focus on investing in the stock market for the long run. Over time, money earned from dividend paying stocks and reinvested in the stock market can provide significant stock market returns that are even greater the average annual 7% appreciation that stocks have historically returned. The key to long-term stock market investing is to ignore quarterly stock market news and developments and to keep long-term stock market investment goals in mind.  If you do not need the money you have invested in the stock market for many years in the future, then why worry about its performance in the short run?  Just find good stocks that have a track record of paying dividends, and let the stock market work its magic over the decades.  Revisiting one’s long-term investment portfolio occasionally and diversifying stock investments over a number of stocks is a good idea, but stick to the long-term plan to make money in the stock market over the long run.

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A Fundamental Stock Market Introduction


 A Stock Market Introduction for Beginners

A thorough stock market introduction is fundamental in creating a sound foundation on which to begin trading. A market acts as a loose network which investors can use to buy, sell, and trade company shares and derivatives. Some shares are sold privately; however, the majority are known as securities and traded publicly on a stock exchange. With a world market value estimated in 2008 to be nearly forty trillion dollars, there is a great deal of money to be made if the trader is knowledgeable.

stock market introduction

Stock exchange and stock market introduction

The networks that allow shares to be traded worldwide are the oil to the machine of global commerce. The next step in a sound stock market introduction is the concept of a stock exchange. Companies are able to sell shares in order to attain capital for various projects. Many of the leading Fortune 500 companies sold shares in order to fund expansions and product development, the investors that bought shares will collect revenue and dividends from the company’s profits.

Within any stock market introduction it is prudent to consider the risks associated with investing. The amount of stability will depend on the investor’s preference and tolerance for risk. In every trading firm the options exist to be as aggressive or conservative as a client is willing to be, this flexibility can make an investor rich, or be the cause of a great loss.

Due to the risk involved in trading commodities and securities, an individual who wishes to day-trade must understand that it is vital to their success that they understand the pro’s and the con’s. The lingo and terminology can be very intimidating and complex to untrained investors; it is easy to make mistakes that could be very costly without a thorough stock market introduction.

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Stock Market Investment Advice to Rely On


Good Stock Market Investment Advice is Rare

stock market investment adviceIn a wild and volatile market with drastic price swings, sound stock market investment advice is more valuable than ever. Yet, despite the stock market’s volatility, investors stay in the game. Some are hoping to strike it rich, while others would be satisfied with a steady increase in portfolio value. Even during tough times, the keys to success are sound fundamentals and consistent trading practices.

Chaos & Stock Market Investment Advice

Chaos produces fear in the market, and during times of extreme volatility, many investors panic and start selling their portfolios. Historically, however, these chaotic times are when the best market days have taken place.

An addendum to the stock market investment advice is not to panic during uncertain market swings is not to trade too frequently. Studies have shown that investors who trade higher than the annual average consistently earn less. Over time, this practice can result in a significant loss of potential profits.

Along these same lines, those investors who try to time the markets do not fare well, either. Stocks will not always perform as expected, or even as they have in the past. A long-term approach metered with common sense and solid research has proven to be the best strategy.

This does not mean ignore the warning signs of a poorly performing stock. Instead, it is imperative to monitor stocks to ensure companies are using sound business practices. Not taking on excessive debt, maintaining plentiful cash reserves and investing in the business for a profitable future are chief among these.

More than any other investment advice, doing proper research before buying a security is vital to success. If the stock is backed by a solid business strategy with sound management practices, the odds are good the price will soar eventually. Do not panic after hearing unreliable stock market investment advice, sell, and miss a potential blockbuster day.

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Stock Market Basics


Stock Market Basics – Stock Market Definitions

Stock Market Basics

Before investing in the stock market, it is vitally important to first understand stock market basics, such as:  what is a stock?, what is the stock market?, how are stocks traded?  Understanding stock market basics will help an investor make sound investment decisions.

A Stock is a financial security that is sold by a corporation that represents a share or fraction of ownership in a corporation.

A Dividend is a cash payment made by a company to owners of their common stock, and is paid out based on the number of shares held.  A dividend can be a regular periodic payment based on earnings or a one-time special payment from a cash surplus generated from business activities, such as the sale of a company division.

The Stock Market is a collection of stock trading markets, which themselves are comprised of thousands of individual stocks that trade on various stock exchanges and stock quotation systems.

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.

To buy or sell stocks, one must have a Brokerage Account.  A brokerage account is an account that an investor opens with a licensed brokerage firm that an investor can use to place orders to buy and sell stocks.  The licensed brokerage firm represents an investor in the stock market, and executes an investor’s buy or sell orders based on the instructions from the investor.

There are two basic types of stock buying and selling orders that can be executed from a brokerage account:  a Market Order and a Limit Order.  A Market Order is an order to buy or sell a stock at the current price that is available at the time the order is sent from the licensed brokerage firm to the exchange or trading platform on which a stock trades.  Since stock prices can fluctuate considerably, even over a matter of seconds, an investor that uses a market order has no control over the price at which their stock purchase or sale occurs.  The advantage of using a market order is that the order to buy or sell a stock will occur, regardless of price.  A Limit Order is an order to buy or sell a stock at a set price.  Although a limit order guarantees the price at which a stock transaction will occur, the disadvantage of using a limit order is that there is no guarantee that a stock will be brought or sold if the limit price that is set is not reached during trading in a stock, and as a result the buy or sell order may not be executed.

Stock Market Basics –Basic Stock Market Investing Strategy

Understanding stock market basics includes understanding the basic stock market investment strategy of buying stocks low and selling stocks high.  Everyone invests in the stock market to make money, and to do so you have to buy when a stock is low and sell it when it is high, which can include buying a stock that is already a high flyer and selling it even higher, as a company’s revenues and earnings grow.  To learn more about stock market basics, see:  Stock Market Advice – Definitions and Strategies, How to Play The Stock Market, and Advice on Stocks – Definitions and Valuation Methods.

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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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