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7 Things To Consider When Investing In The Stock Market

Jun 3, 2008
Have you decided to invest in the stock market? Consider the following 7 pointers when making your investments.

1. Have a solid comprehension of basic economic principals.

Before you get started, you should understand basic principals and laws of economics. The stock market closely follows the law of supply and demand. For example, when there is a large demand for the stock of a certain company, the cost of its stock will increase along with the demand. However, if there are more stock available for sale than there are buyers, the unit price of that company stock will decrease.

2. Learn about prospective companies you want to invest in.

Do your homework before you invest in prospective companies. Read the company annual report and find out about their products, operations, services and basic business track record. This information gives you an idea of how stable the company is and whether they can deliver on their promise to offer profits to investors.

3. Select companies with staying power.

There are so many companies that exist in today's stock market, selecting becomes a major decision for beginning investors. Relatively stable companies and business are owned by the government, unless there is a political revolution or crisis going on. Gasoline companies and telecommunications companies are usually profitable and stable because there is a constant demand for their services and products. While IT companies are rapidly growing in today's stock market, there are so many of them it may be a challenge to check their profiles to exercise reasonable care before investing. Before putting your money into an IT company, verify their track record and make sure they are stable and profitable for a minimum of 10 years.

4. Keep an eye on the news.

Guesswork is completely ineffective when it comes to investing in the stock market. Good intuition and solid decision-making come from learning about global and local news both politically and economically. When you watch the news, make sure to keep track of the industry your company is in. Even stable companies may go bankrupt or have a major blow that will bring them down.

5. Don't put all your eggs in one basket.

Avoid investing in just one company and spread out your stock investments to several businesses. When you have stock concentrated in just one company, you have a greater chance of losing it all. When you spread out your investments over several companies, those earning profits can cushion the ones that not not as profitable.

6. Stockbrokers aren't the final word.

A stock broker is actually gambling with your money so you need to do your own homework. Dishonest brokers can take advantage of investors who do not fully comprehend how the stock market works.

7. Greed is your enemy.

While everyone is eager to make profits in the stock market, an investor loses their sense of reason when they are fueled by greed. A money hungry investor may forget to check on economic rumors and spontaneously decide to sell or buy with the thought of making major profits and then lose it all.

Putting your money in the stock market can of course be risky, but the above tips should help point you in the right direction.
About the Author
For more stock market investing tips -- including a growing collection of strategy and advice -- visit: http://stockinvesting101.net
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