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How To Get Started In Stock Market Investing

Nov 9, 2007
Today's stock market is both alluring and intimidating to investors, big and small. The opportunity to invest your money, your way, via the internet has attracted a lot of people who would not have considered stock market investing a decade. However, there are a few steps a new investor should follow before they lay down any money.

Step 1: Get Educated

The process of educating yourself when it comes to stock market can be mind boggling. There are thousands of web sites dedicated to stock market investing, and most of their information is contradictory. There is no magic formula for stock market investing, most methods work.

The best way to get started is to find one or two sites and follow their information. It is better to follow one or two strategies, develop financial goals, and choose on stock-investing strategy, than to jump around the web looking for the newest and best gimmicks.

Step 2: Research individual Stocks

Do not jump into the whole market, bouncing back and forth in an effort to find the next 'gold mind.' This always leads to a loss of time and money. The best idea is to find an area to focus on. Most industries will produce their winners and losers over time. An investor who focuses on one area, reads everything they can, and studies the reports, is in a better position to succeed than someone who skims the blogs and marketing sites looking for a 'hot tip.'

One of the best tips is, 'invest in what you know.' Many investors do better investing in local companies that are constantly reported in local papers than looking for something new in Brazil or some country with a name no one can pronounce.

Watch the papers. Is a local company set to merge with another? Did a friend mention that the factory across town is bidding on a major contract? In many cases, getting in before the rest of the market 'catches up.'

Step 3: Diversify

Investing in several stocks is safer than putting all your money into one. The stock market is volatile. The biggest blue-chips can drop several points in a day, and the hottest- new find can go bust in an hour. Stock investing is a gamble at the best of times and burning-money at the worst.

The first thing an investor needs to understand is their personal appetite for risk, and what they have to lose. New investors should never play with more than they can afford to lose. Many new investors are tempted to borrow money, and even take a re-mortgage, to follow a tip they were promised would skyrocket.

When considering how much is available to invest, it is important to remember that it will take 3 - 10 years for most stocks to produce a profit. Beware anyone who promises to flip your money at a big profit.

Step 4: Brokers

Discount brokers can be used as a good investing tool as long as the investor understands their purpose and focus. The discount broker is loyal to their commissions first, company section, and client third. A discount brokerage can be used to buy stocks if the investor is confident in their investment skills and has the time to do their own investing. They will save on commissions and can control their own portfolio.

Step5: Don't Panic

The Bull and the Bear have left many strong investors rich one day and poor the next. Panic is the biggest danger for any investor. It causes them to sell to quickly, or avoid investing in a stock that dropped, but which promises to re-balance within a year or two.

These five steps should be committed to memory, and followed by anyone interested in investing. They will save a mountain of heartache and grief in the long term.
About the Author
Mark Walters is a third generation entrepreneur and author. He offers free training and investing videos designed to speed you towards financial independence at http://www.cashflowinstitute1.com/Articles.html
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