Buying Stock

When you first begin your stock market investing program, you can choose to buy mutual funds or start buying stock. Personally, I think that you should have a portion of your money in mutual funds and then buy stock, or individual stocks, with the rest. Whether you use a broker or do it yourself, I think you stand a greater chance to increase your returns by choosing individual stocks. If you do that though, you have to learn how to sell your stocks, you can't buy and hold them. I was just talking today to someone about a family member who wouldn't part with their company stock and last year it dropped tremendously. This company is still here and still operating, but even though it's a good company, it's not insulated from dropping in value.

If you are looking for stocks to buy that never drop in value, you are living in a dreamland. But, everyday, brokers encourage investors to hold on to stocks and letting any gains they had in the stock vanish. Why do they do this? I don't know exactly, but I surmise that many of them do it because that's what they were taught to tell clients and also because they don't have time to figure out if it's the best time to sell a stock. The answer, never sell.

Learning how to buy stocks is easy. Learning how to sell them is a lot tougher. You see anyone can log in to their stock account and pick a stock, even the best stocks to buy sometimes get chosen that way. But once you are in, you kind of fall in love with the stock and ride the emotional roller coaster that comes with it -- especially if it's a company that you work for, it's even harder to part with. Ask any retiree holding company stock in their 401 k rollover. It's tough to get rid of it. But, in my experience, I've seen many get hurt holding on to it.

That's why when you are buying stocks, you've got to let the market tell you what stocks to buy now and not choose them with your heart. Stocks bought with your heart while they might go up, don't go up as often as stocks that are bought with a sound investment plan well thought out in advance.

Spend your time getting your strategy in place and then start putting it into action.