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Invest in Stocks


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Investing in stocks has the potential for steady profits over the years in excess of inflation and well above the returns of bonds and bank accounts. Investing in stocks is different than trading stocks. Investing in stocks means picking a promising company, buying its stock, and making money from dividends and capital gains over a period of time. Trading stocks means buying and selling stocks in order to make money on temporary stock market moves.

Investing in stocks starts with learning basic stock information such as what shares are and how a company comes to be listed on a stock exchange. Then one needs to learn the basics of stock market investing such as where and how to buy stocks, paying commissions, and the difference between stock appreciation and dividends.

Investing in stocks requires that one either hand over the management of ones stocks to a stock broker or develop an investing strategy. Even if one has a broker or portfolio manager who is picking stocks and bonds for investment it is wise to understand the stock market and just what the portfolio manager is doing and why.

Once a person is grounded in the facts about the stock market it is time to learn about when and how to buy stocks. Successful investing in stocks has to do with market timing. Market timing has to do with predicting the future moves of the stock market. This is where candlestick analysis and candlestick charting come in. Letting the market tell you what the market will do is the essence of candlestick analysis. This technique can be used both in trading the stock market and for long term investing in stocks.

Successful investing in stocks requires discipline. It also requires diversification by purchasing stocks in different market sectors in order to balance investment risk. Typical investment advice is to invest in oil stocks, tech stocks, and others when the economy is booming and to invest in bank stocks and companies that sell consumer items during a recession. Diversifying a portfolio with companies in all four market sectors reduces the risk of substantial loss in a turn of the market and provides opportunity for growth in several companies.

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Invest in Stocks

  1. 1. Invest in Stocks By:
  2. 2. Many people invest in stocks in order to diversify their portfolio. Before they can begin, they must first understand how to invest in stocks. Investment securities typically involve the situation where the investor is an owner or the investor is a loaner. By:
  3. 3. For those investors interested in owner securities, they would invest in stocks, equity mutual funds, real estate, REITs, collectibles, commodities, and business ownership. By:
  4. 4. For the owner, the asset is the common stock. When you buy a common stock, you actually become a part owner of the company which gives you the right to vote on issues at stockholder meetings, elect directors, and have additional responsibilities for the company that you own stock in. By:
  5. 5. Loaner assets for an investor include items such as corporate bonds, U.S. Treasury Securities, municipal bonds, preferred stock, bond-mutual funds, certificates of deposit, and many more. The purpose of this article however, is to discuss how to invest in stocks related to owner securities. By:
  6. 6. When investing in stock it is very important to hold stock that is in different stock market sectors. This again will ensure portfolio diversification and your protection. By:
  7. 7. Investment advisors typically suggest that an investor holds at least 6-8 individual stocks representing different sectors. Listed below are the different sectors that an investor has to choose from to invest in stocks. By:
  8. 8. 1) Energy stocks – includes oil and natural gas By:
  9. 9. 2) Utility stocks – includes gas utilities, electric utilities, and telephones By:
  10. 10. 3) Technology stocks – includes electrical equipment, wireless communications, computer hardware, and software By:
  11. 11. 4) Industrial cyclical stocks – includes chemicals, metals, construction, aerospace, machinery, machine tools, building materials, and papers By:
  12. 12. 5) Financial stocks – includes insurance, real estate, banks, brokers, and thrifts By:
  13. 13. 6) Health stocks – includes health-care services, medical devices, pharmaceuticals, and drug wholesalers By:
  14. 14. 7) Services stocks – includes waste management, transportation, media, personal and business services, and entertainment By:
  15. 15. 8) Retail stocks – this includes all retail excluding drug wholesalers which is considered health stocks By:
  16. 16. 9) Consumer staples stocks – includes tobacco, household goods, beverages, and food By:
  17. 17. 10) Consumer durable stocks – includes house wares, multi- industry, autos and recreation and luxury By:
  18. 18. Not only do you need to know what sectors to choose from when you invest in stocks, you must also know how to actually trade stock. This means that you must first know what stock exchange is available. There are two types of exchanges including the “listed” exchange and the “non-listed” exchange. By:
  19. 19. The listed exchange includes the New York Stock Exchange (NYSE), and American Stock Exchange for those investors who want to invest in stocks. To be “listed” means that the brokerage firms contribute individuals known as “specialists” who are responsible for all of the trading in a specific stock. By:
  20. 20. The specialists are also responsible for counting the number of shares that trade each day and then they report the count to the exchange in addition to the price and size of each trade. By:
  21. 21. On the contrary the “non-listed” stocks are traded on the over-the- counter market. The NASDAQ stock market, the NASDAQ small- cap, and the OTC Bulletin Board are the three main over-the- counter markets. By:
  22. 22. Instead of “specialists” the OTC market uses “market makers” to match up buyers and sellers directly, and to maintain the inventory of the shares to the meet the demands of the stock market. By:
  23. 23. As you can see there is a lot of information necessary for an investor to learn to successfully invest in stocks. To further your education you can attend stock market training seminars, join investor forums online, and read a ton of books that you find helpful. By:
  24. 24. Stock trading is a very competitive market so you must be fully- educated and have developed a stock trading plan that works for you. By: