Stock Investing Advice

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With the advent of the computer, online stock investing has become very simple to do. If you are a beginner investor, the first thing you need to do is to set up an account with an online brokerage. Fees and service vary so choose wisely. My preferences are Scottrade or KingTrade. Their costs are $5 to $8 to make a trade. Scottrade has offices nationwide so you can actually go in and deposit or withdraw funds with ease. KingTrade has lower commissions and a better trading platform and tools for investing in options.

There are various ways to trade stocks. You can go long (betting the stock goes up) or go short (betting the stock will go down). The beginner investor is best to go long until you get experience. You can also buy or sell options on stocks. And for those who don't know what to invest in, or don't have the time for internet stock trading, there are many Mutual Funds to invest in. Each has it's own fund manager who oversees which stocks to buy and which to sell.

The problems with Mutual Funds are that they are very diversified and probably won't return much. Even in bad markets Mutual Funds, by law, must invest their funds in stocks. If you do your own internet stock trading, you can sell your stocks in bad markets (called a bear market) and invest the money in money markets or other safe investments while you wait for the next bull market (good market). The good thing about Mutual Funds is that they do employ a fund manager who will do all the stock selection and buying and selling. You really have nothing to do but watch your money grow (or dissappear).

I personally prefer investing in individual stocks, as do many of the world's wealthiest individuals. You can adopt a buy and hold strategy, but with so many people online stock investing, stocks can become very volatile. The busiest times of the stock market are the first hour of stock trading and the last. If you are looking to buy or sell a stock, it helps if you can be online during those times to watch your stock for the proper time to buy or sell. Individual stocks can give you a much greater return on your investment than Mutual Funds, of course you can also lose your money quicker if you are not careful.

You can control risk by spreading your money out over a few stocks instead of just one. However, you don't want so many that you won't have the time to manage them properly.

The trickiest part to online stock investing is picking the right stocks. You can subscribe to a financial newspaper to get info on companies and their stock performances but what do you do, with it?

There are also many online websites that purport to have hot stock buys. They tell you when to buy a stock and when to sell a hot stock. What could be easier? I would be careful with this. If they were so good at it, they would let you have a free try BEFORE taking your money. Unfortunately none of them do.

Now to my next point. How do you know if you are doing well? There are published benchmarks that you can gauge your performance against. The standard benchmark is the S&P 500 Index. The index is made up of several stocks. If those stocks rise, so does the index and vice versa. You can also invest in the S&P 500 Index which will give you the same return as the Index. Historically it has averaged 11% per year. To me that is not going to get me wealthy very fast.

Now if you are going to take the time to study, research, monitor, and worry over your stock picks, then you deserve a return HIGHER than the indexes for your efforts. That is your goal. To beat the indexes. If you can do that, then you are a great stock investor. If you hear an investor claim he recieved a 50% return last year, but the markets (as guaged by their indexes) gained 80%, then that investor or mutual fund, did horrible. Anyone could have put their money in a fund that tracks an index and they would have gotten an 80% return. Of course one year is not indicative of a person's skill. How a fund or investor does over three, five, or ten years is also important.

The stock market has historically averaged 10% per year. If over the long haul you can achieve an average return of 20% then you have done twice as well as the markets and most of those highly paid money managers.

Lately I have been trading stock options. An option is the right to buy or sell a stock. You pay a small fee, if the stock moves in the direction you predicted, you make money. If not, your loss is limited to the small fee you paid for the option. You have a limited loss but an umlimited gain. It's not unusual to get a 200% or more return within a couple of months by trading options (of course you need a willing market and that is exactly what my Market Indicator alerts me to). Getting high returns like this allows your money to grow quickly. It is possible for a beginner investor to take $10,000 and turn it into $1 million or more within 5-6 years, provided they pick the right options. You might want to look into this site for more help with options.