If you are thinking about investing in the stock market there are some key things you need to keep in mind or run the risk of losing your hard-earned money.
Don’t Try to Time the Market
Every day trader dreams of buying when prices bottom out and selling just as the stock price reaches its zenith. The reality is no one can “time the market” and if someone is telling you they can they are lying. There are many factors that go into establishing the current fair market value of a stock but a significant portion of it is not based on sound investing principles.
Qualities to Look for in a Stock
While you may be tempted to buy stocks in a company that has their stock price rising dramatically you need to look at the business behind the share. Ask yourself the following questions
- What does the business offer that competitors cannot offer?
- Does the business have a qualified board that is able to grow the organization?
- Has the company been in operation for a considerable amount of time?
- Does the company actually turn a profit and generate a dividend for investors?
If the company is not profitable then you should not buy their shares hoping to make a profit off the changes in the day to day value of the stock. Day trading can be lucrative but for the majority of people it is comparable to gambling so it would be in your best interest to invest in companies that actually make money. Companies that turn a profit and require capital to fund expansion projects are usually a better long-term investment than holding your money in Certificates of Deposit. By taking the “buy and hold” approach you won’t care about what a stock is doing on any particular day but instead invest in companies that have sound economic fundamentals.