5 Tips For Choosing The Right Stocks To Invest In

by Leon on March 5, 2013

stock market investing tipsFor most people, the prospect of playing the stock market is more than a little daunting. It’s not exactly something that the average person learns in school or picks up along the way. And yet, speculating on stocks has the potential to help your money grow a lot faster than letting it sit in a savings account or CD. It’s just the fact that you are equally likely to lose your shirt that draws most people up short. Hey, it is a gamble, no matter how many facts and figures go into it. But in truth, it’s not exactly like you’re flying blind when you choose to invest. There are all kinds of resources at your disposal to help you out when it comes to finding the right stocks to invest in. And here are just a few tips to help you get started.

Understand risk. Before you even think of investing in stocks you need to understand that they come with varying levels of risk, although they tend to fall into either the low-risk or high-risk category. The real difference is the amount of money you stand to make (or lose) and how quickly. So if you’re betting with your life savings, you might want to steer clear of high-risk stocks. But if you’re just having some fun with your pocket change and you want to gamble big, then by all means treat your foray into investing like a crapshoot. Or if you’re trying to build a diverse portfolio, consider one that is heavily weighted towards low-risk stocks, bonds, and mutual funds with a smattering of higher-risk ventures.

Do your homework. It pays to know what you’re doing, in this case literally. So before you invest in anything you should educate yourself on the stock. Get online and look at how the stock has been trending for the last couple of months as well as the last few years. Compare it to other stocks of the same type and then look at their forecast for the coming months. A stock that’s in a slump now may have a history of spiking during product launches, and if they’ve announced a new addition to their lineup later in the year, now may be the time to buy and sit on your stocks. Following the market and reading trade publications (like The Wall Street Journal) may also help.

Go with what you know. Okay, let’s be clear about this one: insider trading is illegal, so if you happen to be in the know because you work for a company or you have friends feeding you tips, getting caught trading before a stock shoots up or down a few too many times is likely to raise some red flags with the SEC. That said, it’s not a bad idea to consider purchasing stocks that are in your wheelhouse since your base of knowledge will help you to spot trends and make informed decisions about buying and selling, giving you something of an edge. If you don’t know anything about precious metals but you’ve worked in the entertainment industry for a while, then you shouldn’t go for gold just because all of your friends are doing it. Stick to what you know.

Hire a pro. If you really don’t know what you’re doing or you’ve had no luck so far, consider hiring a stock broker to help you out. These pros know the ropes and if you find someone good he’ll not only advise you on how to invest, but he’ll also help you to understand what you’re doing and why some investments are better than others.

Take a class. If you aren’t keen to incur the expense of a stock broker, another option is to sign up for some trading academy stock market trading courses (or similar classes) that will educate you from the ground up on how the market works and how you can learn to invest wisely on your own. Actually, anyone who wants to invest should consider taking such a class simply for the ability to make informed decisions, even if they happen to have a broker on tap. It’s just good business.

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