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7 Stock Market Tips to Live By

Aug 17, 2007
Planning to go into stock market investment? Here are some general tips to live by.

1. Understand the basics of economics.

The stock market follows the laws of economics, particularly the law of supply and demand. If there is a greater demand for the stocks of a particular company, the price of its stocks will go up accordingly. On the other hand, if there are more stocks available for selling (more sellers) than stock buyers, the unit price of that company's stocks will go down.

2. Study your prospective company/ies.

Read up on the company's profile: products, services, operations, and track record in the business. This is important to assess the company's stability and capability to deliver its promises and meet its profit targets.

3. Choose companies that are more likely to stay.

With so many existing companies in the stock market, choosing becomes a big challenge for beginners. Government-owned companies and businesses are relatively stable, unless there is a political revolution in the horizon. Telecommunications and gasoline companies are also stable and profitable since the demand for these products and services is constant. Although IT companies are the fastest growing in the market today, be careful because there are so many of them that it checking on their profiles could be very taxing. Choose IT companies that have proven track records of profitability and stability of at least 10 years.

4. Always read and watch the news.

Dealing with the stock market is not a guessing game. Sound decisions and good intuition are results of constantly learning about the local and global political and economic happenings. Give particular attention to the industry where your company belongs. Even stable companies can suddenly go bankrupt or experience a big blow that can bring them down. Remember Enron?

5. Spread your investments.

Avoid investing in just one company. If all your stocks are concentrated to one company, the chance for loses is also greater. Spread them out so that earning investments can cushion those investments that earn less.

6. Do not rely solely on stock brokers.

Do your homework. Remember, the stock broker is "gambling" with your money. When an investor does not understand how the stock market works, he/she becomes vulnerable to scrupulous brokers.

7. Do not be greedy.

Although stock market investment is all about profits, becoming greedy will make an investor lose his/her better senses. He/She might suddenly forget to check on economic rumors and decide right away to buy or sell thinking that he/she would make big profits by doing so.
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