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.