Investing in stocks requires certain knowledge and strategies, whether you are a first time investor or those who have been around the market scene for a while. Although stock investment is something of a gamble, timing is imperative whether you are buying or selling stocks. You need to ensure you do this at the right time so that you make money rather make a loss your investments. Knowing how to invest shrewdly does not happen overnight, and you will need the patience to learn and become an experienced investor. There is no right age or salary bracket for you to start investing. You can start right now.
Naturally, you will need to make initial important decisions, as to whether you want to go with a full service broker or a discount firm. You will also have to do the necessary research on them, to see if the services they offer are suitable for your investment plans. Do not make emotional decisions on your stock investments, right from your initial cash savings to choosing the right stocks to go with. You should follow a system and track all your stocks. Your stocks should not be too many, not more than 20 otherwise you cannot sufficiently keep track of all of them.
When you are actually making the decision on what specific stocks to buy, you should keep in mind that certain industries and sectors are usually a sure bet. Top industry groups include technology, communications, software, entertainment, medical and certain retailers. You should also know that cheap stocks are very risky. In the past, many companies’ stocks that doubled or tripled had an initial price of $28 per share.
You shouldn’t just hand money to the investment broker and hope you will one day get returns on your investments. Arm yourself with some technical knowledge that will help you learn to time your decisions, such as stock price and volume chart. You should learn essential analysis details of the company whose stocks you wish to purchase, so that you pick quality stocks. These include things such as earnings, growth, profit, sales and return on equity.
The Return on Equity (RoE) of a company is weighty. This is an indicator that shows how well or poorly the company is performing financially, and you should go for a company with an RoE of 17% or more. You should also find out the management share ownership, as most winning companies will have management teams that own a large percentage of the shares.
Generally, winning stocks will have strong earnings and sales. But you will need to buy at the right time. For instance in 1986, Microsoft was up 266% after its Initial Public Offer (IPO) in only 30 weeks. Additionally, if you want to make sizeable gains, you should know that stocks coming out of a price consolidation base are quite profitable. But always be wary of sharp price movements either upwards or downwards for no apparent reasons, as these may be as a result of manipulation of share prices, usually by a group of professionals for their own benefit.