Sunday, May 31, 2009

Stock Market Investing

Let's get right into it here and talk about stock market investing. This has been an eventful time for most of us who, while used to market corrections, did not expect such a huge drop in the values of just about every type of investment you can make. If you lost almost half of your money, you are not alone. And, you might as well fire your broker because they did nothing to prevent it from happening, like telling you to sell along time ago! Why? Because you can do that on your own with ease. The stock market today needs a different approach.

Now, when you think about it, it does make some sense that market was due for some sort of downward pressure because of the baby boom generation. For all of these years, they have been working and pumping money into the market through 401k rollover investments and mutual fund purchases. Now, that they are old enough to take their money out and because prices are really just supply and demand, I think a downward trend was inevitable, it just happened really quickly and it happened in every sector.

Why You Should Be Investing In The Stock Market Today

Here's a question.

Should you invest in stock market today? Yes or No?

Yes, it is still a wise choice if you are a long term investor. It's important to remember that a critical factor of how invested you should be in the market is when you need your money back. And, to some extent, many investors got hurt really bad if they needed their money now. For many people though, this is an excellent time to buy.

I think I read a statistic that said the market value a few weeks back was where it was like twelve years ago. What a huge opportunity for a long term investor. Rather than having to pay top dollar for stocks, you can now get them at a much, much lower price.

This is particularly great the younger you are because you don't have to buy your shares at inflated values. Everything is pretty much on sale. And, in the market, not every single company is depressed. With the right research and applying it to your investments now, you can be way ahead of the game down the road. The market for today is there for you to conquer.

Stock market investment research is the key to success. And, I wouldn't count on your broker to get it right this time. I would do it myself. Whether you choose individual stocks or mutual funds, I'd take the time do your own research and here is why.

I've got some people I know who lost a bunch of money this year--probably almost half of their portfolios. Most brokers tell you to "buy and hold" but in reality, this just killed about everyone in the market today because no one ever told anyone to sell. Not to mention, these people were already retired and all in stocks which was unwise to begin with. They will not have the time to ever recover from such a loss in the market.

Now, just because of this, it doesn't mean all brokers have no skill or expertise. For the most part, they are all good people doing the best that they can. You just have to remember that their job as a stock broker is first and foremost to bring in clients not doing research and that takes the bulk of their time.

That's why it is critical that you decide what you are going to purchase AND you decide under exactly what circumstances you will sell because no one else will.

Before you start investing in stock market investments then, your first objective will be to set up your own independent research department in your home or office. In it, you'll need :
  • A computer 
  • High speed internet 
  • A brokerage account 
  • Books and publications that provide insight into the market (The Neatest Little Guide to Stock Market Investing and Stock Market Investing for Dummies won't cut it, you will need more than that) 
  • Websites that you visit for research 
  • A watch list 
  • Annual reports of companies you are interested in 
In addition to this, you will need to establish some simple rules or guidelines of what type of investor you are going to be, what type of asset allocation you should strive for and some good strong rules to buy and to sell. So, you are not acting on emotion alone.

Online Stock Market Investing

And, if you are serious student about it, there's never been a better time in our history because of online stock market investing technology. It's even easier to track down the best stock market investing tips and stock market investing advice. You don't have to rely just on your broker or that hot tip from your brother-in-law.

That being said, you'll need to make sure that you are getting objective advice. And beware of internet scams. I know in my email inbox, I receive hot stock alerts that are just people trying to manipulate the price of individual stocks. I've got a friend who followed the advice once, only to lose money.

(As I wrote this, I got an email from a guy who says he day trades and explains how much money I'll make if I invest in the stock he's promoting, how about that for timing.)

Take heed.

Your best advisor, again, is probably going to be you and the hot tip is not going to come from some stranger on the internet you never have met except for the spam email they sent you to get you to buy some stock you have never heard of. It's going to come from well thought out and well planned purchases by your own personal research.

But, even though the technology is there, beginner stock market investing can be scary and intimidating. I know even with a financial background in banking and insurance, it's a lot to learn. It's a lot to sort through. And once you make purchases, while it is exciting, it will be challenging to stick to the rules you set for yourself. Be ruthless and stick to your guidelines.

It might take a while to find and you might make some mistakes, but once you get your feet wet and have some success with it, you'll never look back.

I know that when I first started I bought some stock market investing software. It was some stock technical analysis tool. I am sure I had some valid reasons for purchasing it, but didn't make use of it like I thought I would.

I have bought many books on the subject, but to be honest with you most of them were crap and didn't lay out a specific plan of attack. We'll probably talk about some of them here on this site as we go along.

Stock Market Investing Basics

If you are completely unfamiliar with the market, you'll need to get a handle on the fundamentals. What are stocks, what are P/E ratios, what is an income statement or balance sheet, what are earnings per share until you learn how to invest in stock market shares. We all started somewhere. Don't let that deter you from developing your very own stock market investing strategy.

You'll quickly learn the market is not as scary as you are made to believe. It's important for Wall Street to make it complicated and therefore confusing you into paying brokerage and management fees they don't always deserve. Once it's demystified, you'll find that you can navigate it too and maybe even better than the pros.

In fact, many mutual fund managers fail to beat the overall S&P 500 returns each and every year and they are the experts! Surely we can perform a little less poorly than they do, don't you think? If they are not scared to fail, why should you be? It's your money either way, right?
Stock Market Investing 101

So, what we are going to do on this site, is setup our own little corner on the web and put words into action. Starting with a little over a thousand dollars, we are going to start at the beginning with our very own stock market investing strategies that we uncover through our own research. We'll review the stock market investing books available today as well as the other resources you'll need to discover what stocks to buy and develop rules under which you should also sell them.

We'll talk about the basics. How to read stock charts. How to open a brokerage account. How to use the tools in our brokerage account. How to set up individual watch lists. Also, we go over how to make stock trades as well.

You'll see the nitty gritty of our performance. There will be mistakes and successes. Hopefully, this will help you with your own investment confidence. They key is to minimize mistakes and maximize our successes.

The goal of course is to make money investing the stock market prudently and with a plan. And while we might not be the best at timing stock market investment decisions, no one really is.

So, join in and feel free to share your experiences and tell us about your own experiences by commenting on Stock Market Investing Today.