How Not To Buy Stocks – Do These And You Are Sure To Lose Money

If only I had read an article like this before I dived into the world of stock investing. I must say, three years ago I knew absolutely nothing about how to buy stocks. Of course, through that experience I learned several ways on how to buy stocks and lose money.

Buy stocks without doing research – I joined a discount brokerage and went shopping for stocks right away. I had no clue what I was supposed to look for so I just picked random names I liked and bought a few shares here and there of each.

I must admit, I thought I was doing quite well. I mean, some of the stocks I picked ended up doing alright, but the majority of them when no where fast. So if you want to make sure you fail at buying stocks, skip the research.

Don't Consider the Trading Fees – Learning how to buy stocks the wrong way is easy when you don't consider trading fees. I must admit, when I joined the discount brokerage I was really excited about their $4 trades. What I forgot to calculate was the math.

I was investing an average of $10 per stock when I bought them. Shelling out $4 for a $10 piece of stock meant I was losing 40% right up front each time. When I decided to sell the stock I had to pay another $15 just to sell! You can see where I am going with this, it can turn into quite a fiasco.

Don't Diversify – The surefire method for how to buy stocks the wrong way is to buy a single stock and nothing else. Throw all your nest egg into one company. I mean, so many people do it, especially in their companies at work. What is in your company 401K?

Having all your eggs in one basket sets you up for quite a roller coaster, except there is no safety rails on this ride. You could easily lose everything.

Buy High and Sell Low – The market is fickle so if you want to set yourself up for failure, go with the masses. I admit, it is very tempting to see a stock going higher and higher and yet... higher again.

This makes people want to buy it more, increasing its demand and running the price up even higher. This is great right?

Sure, it can be sometimes, but if the stock is overvalued you are really learning how to buy stock the wrong way with this purchase.

To buy stocks the wrong way, sell the stock as soon as the price dips some. Even if the company is solid. Following the herd is a great way to go down the wrong path.

Hold On To a Losing Stock To Try and “Break Even” - I bought a popular stock for $63 a share, not too long later it dropped into the $40 range.

The research showed the company was not doing so well, but I wanted to at least get my purchase price back. I mean, it is sure to bounce back up right?

Fast forward a few weeks and it was in the $30 range. Dang, I should have sold it at $40 when I had the chance. Well, I am going to at least wait until it gets back into the $40 range before I sell it.

Fast forward... it is below $20 a share now. Keeping a stock when both the price and the company are going downhill is a sure way to learn how to buy stocks the wrong way.

Avoid Learning The Right Ways - If you really want to learn how to buy stocks the wrong way through the school of hard knocks, make sure not to discover the right ways.

However, if after reading this article you decide you want to learn how to make some money with stocks the right way visit http://www.howtobuystocks.thebestreview.net/

About the Author

Amy J is an active stock market investor who shares the secrets on her website about How to Buy Stock for Free. Visit today and start investing.

How To Buy Stocks That Are Hot With No Effort

Even traders want to be trendy when they buy stocks. Many traders make trades because of public opinion, not because the trade itself makes sense. When a particular stock seems popular, they rush in so they don`t feel they`ve missed an opportunity. As a result they end up buying at a price point where the trade can`t possibly work out. You should always avoid the emotion of the “hot” stock.

Here`s an example of what not to do when you buy stocks: Let`s say you`ve been following a particular stock which is in a “hot” sector, and it just announced a stock split. The stock is now at $18, and you calculate it could get to $25 or more by the time of the split. The market is currently bullish, and it looks like a great trade.

The problem is that the stock has been rising for the past four days. It started at $12, but you didn`t notice it until it hit $18, and it`s still rising. The stock split is a month away, and you know it`s likely to fall in price somewhat between now and the split. Still, everyone is talking about this stock. What if it continues to rise and becomes the next blockbuster? You become afraid that if you don`t make a trade you`ll miss a great opportunity. (And besides, you want to be able to tell people that you hold a position in this stock, because it makes you seem smart.) So you buy 1,000 shares at $18.50.

During the next two weeks, the stock goes to $19, then levels off, loses momentum, and drifts down to $17. Then a couple of leading NASDAQ companies give earnings warnings, the market drops, and the stock slides to $15, triggering the stop you`d set at $16 on half your holdings. The stock trades in that range for a week, and then begins to rise slightly going into the split. Your plan is to sell a day or two after the split. The stock rises a little beyond $20.50 by the second day after the split, and then the volume dries up and you sell it for a $2 profit. But since you stopped out of half your shares at $16, you lost $2.50 per share on that half, with a net loss of $.50 on 500 shares. What went wrong?

What went wrong was that you didn`t let the stock come to you. Instead, you chased it as its price rose, knowing perfectly well that, following the stock split trend, it would probably pull back before running up again. It was more likely to pull back than it was to continue on an uninterrupted run to $25, and you knew that if you bought at $18 or higher you were probably paying too much. You ignored what you knew was more likely in favor of what might happen.

You should have given the stock a chance to come to you, at a price you felt was reasonable. If the stock had pulled a surprise and never gotten down to where you thought it would, that would be okay. There were many other stocks to trade, and some of them would have come down to your price. You didn`t have to own this particular stock.

What was the right way to play this particular scenario? When the market is bullish, it`s very likely for a stock to rise when a split is announced, drift down after a few days` rally, and then begin to rise again a week or so before the split. If that`s the trend and there`s no solid reason to think the stock will rise immediately, wait a few days for the stock to drift down and stabilize before buying it. If you had done so in this case, you could have bought it at $16.50 and then sold it for $20.50 for a $4.00 profit on the entire 1,000 shares.

If you had a solid reason to think the stock might continue to rally, you could have bought half the total number of shares you wanted at a price that might have turned out to be too high, and waited for a lower price to buy the other half. If it had turned out to be too high, it would only have reduced your profit. (No stock goes up or down in a straight line. Wait for a pullback before buying.)

There is a good way and a bad way to buy stocks or trade a “hot” stock. The good way requires discipline and careful market evaluation. The bad way is to trade from your feelings. As you can see from this example, it`s always more profitable to trade the good way.

About the Author.

Discover BIG profits from the market by downloading your FREE copy of David's new Ultimate Trading Systems course. http://www.ultimate-trading-systems.com

Should I Buy International Stocks?

Going International

A lot of noise has been made recently about the importance of investing in international markets for greater returns. In fact, the world's greatest investor, Warren Buffett just made a huge international acquisition. Should you be looking as well?

Buy What You Know

The legendary money manger Peter Lynch of Fidelity Magellan Fund fame always preached investing in what you know. He used to do "research" on some companies by talking to his wife and kids about new products or retail chains. He was famous for sitting in malls and watching stores to see which were busy and which weren't. This all fit into his strategy of using more than the financial news and crunching numbers to find the "next big thing" before anyone else. If he didn't fully understand the business from top to bottom (beyond just the numbers) he wouldn't buy.

The same should be true for your investment portfolio. You need to be invested in businesses that you understand. You need to have your money in companies that you can see and touch. If you don't know how the company makes money (remember Enron?) and what outside forces affect a company's earnings, you really shouldn't trust your money with them.

Going Abroad

The problem with international investing is that many companies overseas don't have a presence in the US yet. This makes it difficult to fully evaluate their true business prospects. Still, people are flooding markets in India, China and other markets with hopes of higher returns. Almost two thirds of mutual fund deposits last year went to international funds. This makes sense because many international markets have fast growing economies and have huge populations. People are seeking the potential for great returns.

The problem is that there are a lot of forces beyond your control or understanding outside the US. The Chinese government is just starting to come around to the idea of capitalism. Russia is moving away from political freedoms and back to more government control of the economy. When a free market does not exist, growth is hindered. The list goes on and on.

If you are going to invest in individual international companies, they should be ones that you have personal experience with or know very well. We think that the overall growth will be strong internationally but the overall risk will be high as well.

I Really Want International Exposure.. What Do I Do?

We believe the safest and most cost effective way to have some exposure to the international markets is through two Exchange Traded Funds. The first is the iShares MSCI Emerging Markets Index Fund EEM. As the name suggests, this is a fund designed to track the performance of the MSCI Emerging Market Index. You get a passively managed basket of stocks that give you exposure to smaller, faster growing, emerging markets. The expense ratio is .77% and pays around 1% in yield. The turnover is very low at 9% which makes the fund very tax efficient. The shares have experienced a recent pull back and you now have a great opportunity to buy at a discounted price.

The other ETF to look into is iShares MSCI EAFE Index Fund EFA. This will give you exposure to the rest of the more developed world outside the US. Here, you have exposure to Europe, Australia and the developed countries of the Far East. The Fund has an expense ratio of .36% and a turnover ratio of only 8%. It also pays a nice 1.64% yield which more than covers the expenses. This fund has also seen a recent pull back and might be showing signs of a buying opportunity.

Overall, be careful in international markets. Investing is difficult enough in American markets. EEM and EFA can make great additions to your Core Portfolio for international exposure and diversification. If you want to have some individual international companies for your Trading Portfolio, feel free to speculate. You should fully understand how the company operates before investing. Make sure that you understand the risks involved with owning these companies and understand what makes them a good investment in their respective country.

About the Author.

Christopher Yeager is a respected banking and investment professional with years of experience. He is the owner of http://www.safelywealthy.com , a subscription-based webiste for individual investors looking to create wealth and minimize risk. He believes that portfolio management is the key to success in the market.

Are You Looking To Buy Stocks?

Investing for the future is important if you ever plan to retire. One form of investment is buying stocks in corporations. Stocks represent a portion of a company, so when you buy stocks, you are essentially buying into the company. You can benefit from any profits it makes, but you can also lose money if the company’s performance, or the market as a whole, goes down.

When you look at investing in stocks, you may want to consult a financial advisor who works with stocks and mutual funds for a living. He or she will have knowledge of which stocks you should buy and which ones you should avoid. If you wish to choose the companies you will invest in, look for companies that are growing and offer some stability. Also, if sales in, say, electronics are very high, you may want to invest in a company that manufactures electronics. Take some time to research the stock market before you make your investment decisions.

Once you have decided on some stocks you would like to purchase, you’ll need to pay attention to what the market is doing. In order to benefit the most from your investments, you’ll need to time when you buy, and when you sell, your stocks. If you choose some stable companies and buy stocks in them while prices are low, because of the market or because of a period of time where the company is not bringing in large profits, it is most likely that your stocks will increase in value.

When you are looking to sell your stocks, it is good to set a price for yourself and decide that when your stocks reach that price, you will sell them. Often, people hang on to their stocks, wanting to get the most out of them that they can, and then the market drops and they lose money.

You can see that there is frequent decision making in the process of buying and selling stocks. If you are willing to put some time and effort into your investments, you will be pleased to see how much you will profit from your stocks.

About the Author.

Learn more about the stock market and trading at http://www.theexecutivetrainer.com/stockmarket/

So what is the difference between stocks vs. bonds? People today are interested to know what the better method of investing is. Trust be told, many believe that bonds are better because they are a safer investment, as you are virtually assured of achieving a positive return on your investment.

Here is a brief explanation of a bond. The company you hold a bond in has issued you a bond in exchange for your money over a certain time. When the time is up, they will pay the loan back to you with interest. Therefore, as long as the company is financially stable, you can be almost certainly to make that money back.

A stock, on the other hand, is not guaranteed and fluctuates all the time. Therefore, most people believe (in some cases rightfully so) that a bond is a better investment because they are less volatile.

However, here’s something very few investors are aware of: when done right, stock investing can actually be just as guaranteed of giving you a positive return on your investment as a bond, and maybe even more so.

You see, when you focus your investing on companies that have sound financially numbers and good prospects for the future, you can be virtually guaranteed of making money. However, when, like most investors, you try to spread your investments around and include companies on shaky financial ground, you are just asking for trouble.

The reason that so many investors lose money is that they invest in companies without looking at their financial statements. The only reason they invest at all is they think the stock price will be going up short term. Therefore, the first sign up trouble, they sell out.

On the other hand, however, when you focus on sound, stable companies, you are not only assured of making a positive return of investment, but you can make a lot more money than you would with a bond. Warren Buffet is famous for achieving a 15-20% growth rate on his portfolio nearly every single year. This wouldn’t be possible without his strategy to focus on companies he can be assured of will turn a profit.

Therefore, don’t be fooled into only focusing on bonds because they are safer. When you open your eyes, you will actually realize that there are many stocks you can invest in assured of generating you a profit.

About Author
For more tips for investing in the stock market, visit http://www.stock-investing-tips.com, a popular site that teaches how to make a fortune

Penny Stocks Buying Selling: Day Trading Penny Stocks Is Risky And Profitable

The world of penny stock day trading is often compared to gambling.

Why?

Because when you win, you win big. If you lose, you can lose a whole bunch of money. The speculative nature of penny stocks or microcap trading is well known. Companies that offer cheap stock are not the same companies you’ll find in the blue chip market. On the contrary, they are often very risky investments.

The reason why their stock is so cheap is because they are just starting out in business or they have mismanaged their business and need a quick bail out. Selling inexpensive stock is a way to raise some fast cash for their enterprise.

Determining which small cap stocks are a good buy is very difficult and not for amateur investors. The truth is, most microcap stocks are pure junk. It’s really common for a novice investor to lose money after being lured into buying a cheap stock that is supposed to make them rich.

Very often, these sure deals are nothing but scams that are designed to make the insider stock picking services big money. They count on your lack of experience and knowledge to make them rich.

Only about 5% of the small cap market is truly worth investing in – the rest should be tossed aside like yesterday’s garbage.

The good news is that with the right information and guidance, you can make really great profits in this market. Most smart investors will sign up for a newsletter that specializes in penny stock picks. The reputable newsletters will only analyze the top 5% of companies that they feel are worth putting money on. They will usually recommend three to five good picks. You then decide whether you want to go with their picks or not.

Another reason why it’s a good idea to go with a newsletter is that you can greatly minimize your risk. Wise investing is all about picking more winners than losers and not putting all your eggs into one basket.

Since you probably have a full-time job, you don’t have time to spend pouring over endless data about thousands of companies out there offering cheap stock. You definitely need experts to do this for you, and you also need the tools to make your investment decisions easier.

Many people get into day trading penny stocks for the thrill of making big money in a short amount of time. While this is totally possible, you must also temper your enthusiasm a bit in order to make good decisions based on factual information.

Here’s an example of a typical microcap stock trade:

Let’s say you find a start up company that’s in the software business. They create medical software for hospitals. This sounds like a pretty good business to you so you take a look at their stock offering.

You see that they are selling shares at 50 cents a piece. So, you decide to buy 500 shares for $250. You sit on the stock for a while then you see that it starts to go up. It peaks at $3 per share and you decide to sell. You’ve just made a nice $1,250 profit from that one stock. That’s a 600% rate of return!

This kind of profit is what excites most people about small cap stocks, however, if the opposite should happen and that stock goes down by even inches, you’ll lose all of your initial investment money. This is why you should never invest money that you need to pay your bills and buy food.

Only invest extra money that you can spare. It’s similar to if you were going to Las Vegas for a vacation and you budgeted a certain amount of money to spend on gambling at the casinos. If you lose it, no sweat - it’s fun money anyways.

Day trading penny stocks can be looked at in the same way. It’s fun and profitable when you win, but not so much when you lose. Unfortunately, many investors gamble with money they shouldn’t be risking and lose it all with one or two bad trades. I know this isn’t going to happen to you because you’re going to learn how to invest the smart way, and in this topsy turvy market, that’s the only way you’ll end up being a winner.

About author

believable A robot that trades penny stocks better than many humans. Find out how you can use Marl the stock trading robot to earn a steady stream of profits. http://pennystocktradingmadeeasy.blogspot.co