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Stocks

Investing in stocks is a great opportunity to share in the profits of the most viable companies on the planet. The trick is how do I know which ones do I invest in and which ones do I not. This is where a financial education is a must. It only takes $500 to $1000 to get started and you can add to your investment account from savings from your salary. The important thing is to get started and gain experience.

Below are recommended book titles & links to sources of good information. Just click on them for more information. Start with William's O'Neils 2 books to put you on a solid foundation. You will know what to do first, where to set up an account, how many stocks you should own, and other essential things you need for investment success.

 

 

Be sure to check my page onStock Resources - a lot of good information is available on the internet, newspapers magazines and over 150 books are linked to Amazon.com for the convenience of both the novice and the professional investor.

This is what Bill O'Neil founder of Investor's Business Daily has to say about the opportunities we have in front of us. "Its a shame. Most of us know social security will not meet our retirement needs. More than ever before, additional sources of income are necessary to maintain a comfortable standard of living. Beyond that, there is the real potential for financial freedom and security. So why aren't more people taking advantage of the tremendous investment opportunities in this country?

Lack of information is no longer an excuse. With the internet,individual investors have more access to information than ever before. But there in lies the challenge, seperating the relevant information from the countless opinions, personal biases and promotions out there." - 24 Essential Lessons for investment Success

Rule Number 1 - Obey The 8% Rule

 

Protect your capital.
If stock drops 8% below purchase price sell. It’s like an insurance policy. Cut your loses and don't worry about it. You can be wrong on 3 out 4 stocks and still make money

Rule Number 2 - Pay attention to Volume:

 

The number of shares traded daily shows how much above and below average a stock traded yesterday. Watch volume % change figure over the past 50 days.

Rule Number 3 - Avoid Low Priced Stock:

 

Low priced stock sell for usually what they are worth. Look not for a bargain but for the greatest potential for the stock to go up in price. Sometimes you may be tempted to invest bare in low priced stocks but first make sure they meet 5 checkpoints. Ask for Free article "5 Check Points of Small Cap Funds".

Dividends:
Many of the best companies reinvest to fuel growth. Greatest gains come from price gains, not dividends. All stocks are bad unless they go up in price.

Rule Number 4 - If you don't have time - Invest in Mutual Funds:

 

Mutual Funds are good investments unless you have the time and desire to trade in individual stocks. Buy a domestic diversified growth stock mutual fund and never sell it.

Let the law of compound interest help you achieve your financial goals by reinvesting capital gains & dividends when fund distributes them to share holders. And don't let market trends shake your conviction. Go to page on mutual funds or see side bar.
ule Number 5 - Always put the odds in your favor

 

For newbies avoid speculative areas such as a) low priced stocks, b) futures, c) options, and d) foreign stocks.

 

And if you invest - have an investment strategy, always know when to get in and out of the market before you start. Set it up so that if you lose (& you will) your loses are always 1/3 or less of your potential gains. That way you can afford to lose 2 times in three and still stay ahead. Play the odds. I always start with the amount of money I am prepared to lose and offset it with potential gains. If the the potential gains are better than 3 times my potential losses, I am in the money.

Rule Number 6 - Don't fight the Trend

 

If the trend for an individual stock is going down don't buy untill there are strong indications it is going up. And if your stock is going up and the general market or sector is going down - bet on the general trend. Going against the general trend is similar to a pebble thrown uphill during an alvalanche. See "Picking Winning Stocks" and " The 5 Worst Mistakes you can make" below.

Picking Winning Stocks:
They are preceded by significant accelerations in recent quarterly earnings and:
- Have large annualized growth rate(25-50%)
- The company has something new going on (new product, new management, and new industry conditions.
Are industry leaders (especially if trading at new price highs and have formed a constructive chart pattern) Learn how to read charts, i.e. " 24 Essential Lessons for Investment Success" William J. O'Neil Click on book cover for more info

 

- Show interest from institutional investors.

What about P/E Ratios:

 

Low price to earnings ratios are typically considered good values yet this strategy may prevent you from getting the biggest gains. i.e. AOL, Microsoft & Cisco Systems -you would have missed out in periods of greatest gains. Do not be discouraged from buying a high price earnings ratio for a high quality stock. Everything sells for what they are worth.

Look at charts: They show the stocks history
The fundamental characteristics while essential are only half the story. Technical characteristics from charts indicate if you have bought at a good time. They show volume and price action and one by analysis can see what's happened in the past and can identify prime conditions for a run-up in price or potential pitfalls.

 

The 4 Worst Mistakes you can make:
1) Not cutting your losses @ 8% & living to trade another day. Find about stop losses and when and when not to use them.
2) Buying low priced low quality stocks.
3) Fighting the trend of the general market. The market is always right and as they say the trend is your friend. When the market turns bearish get out. Reduce your holdings.
4) Letting your emotions sway or warp your investment strategy. The answer is to have an investment strategy before you decide to get in. Sometimes your mind is a dangerous thing your can easily rationalize your own behavior and stay in too long or get out too quickly. In fact we may operate under a learned behaviour which causes us to inadvertingly sabatoge our own success. Ask for a great Free Program that will test how successful your investment strategy is - write me and put the word "investment positioning" in the subject heading.

One last god send - paper trade - until you get it down pat and invest wisely in your financial education. Nothing will give better returns than an financial education. First learn what kind of returns to expect. For other suggested readings see homepage at bottom. For extensive suggested readings on stock investments for novice and experienced investers alike see Stock Resources.