What are the basic principles in investing in the stock market ?

Answer 1

Lots of good advice, I'll pitch in a couple more items:

* Always know what you're investing in and why you're investing in it. Ask yourself, "Do I really understand what this company does? Why do I think this particular stock is the best investment for my money?" Always do your own research... don't buy because someone else gave you a great tip!

* ALWAYS have an exit strategy. It's great when a stock's price rises and you double, triple, or quadruple your money. But, sometimes we're wrong and we lose money. And, other times, a stock that's done very well for a while suddenly tumbles and you lose your profit and then some. It's important to know when to sell, both to guard against excessive losses and to secure your profits on winners.

* Don't make impulse decisions! Take the time to do your research. Don't get nervous about possibly missing "THE great opportunity," just know that there's never only one great stock at any one time!

* Whenever possible, make use of IRAs and other retirement accounts to keep taxes from diminishing your returns.

Answer 2

1. Diversify your investments, so that not all your eggs are in one basket. Mutual funds are a good way to diversify.

2. Use retirement accounts as much as you can, to get tax advantages.

3. Invest early and often, and regularly. The more saving and investing become habits, the more wealth you'll accumulate. Try to save on an automated basis, such as through payroll deduction.

4. Be patient and invest for the long term. Very few people get rich quick. People that have a long term focus moderate their risks, and have a better chance of building wealth.

Answer 3

Linda, the most basic principles are:
1) Educate yourself. (Fisher: "Common Stocks, Uncommon Profits, Graham: "Security Analysis"
2) Do your own research.

I would add to this:
3) Buy into a company (not just a stock symbol). Shares of a good company will continue to go up in the long term, and occasionally offer short term decreases in price that allow you a good buying opportunity.)
4) Look for dividend paying stocks, it doesn't have to be a huge dividend to be a good indicator.
5) Begin watching for trends in the sectors you own/consider buying to know the best time to buy more of the stock or sell for a short period of time and re-invest later.

But the bottom line is you need to educate yourself and do your own research. If someone recommends a stock to you, it means it's a good place to research but often means not a good one to buy.

The best companies are boring, as opposed to trendy. Southern Company(SO) is a utility, pays 4.5% dividends and has outperformed XM Radio in the 3 yr period since all my friends were telling me XM was the place to invest.

Dividends are taxed at a lower rate than interest and much lower than 'earned income.'

Another place to learn is "Mad Money" by Jim Cramer on CNBC in the evenings. He makes it interesting but never buy his recommendations within 3 days of it. (Talking about his first recommendation each night). His loyal viewers immediately run the price up.

Be aware that stock analyst recommendations are generally an indication of what everybody else has already done or may do. Be wary of what they say. Often times they are trying to latch their buy rating to a stock that has already gone up. Once again, do your own research.

Answer 4

- Start early and invest at regular intervals.
- Match your risk exposure to your time horizon and personal risk tolerance. Only you can decide what amount of risk is right for you.
- Use mutual funds for the core of your portfolio. They diversify away non-systematic risk.
- Ignore the current trends in the market. Do not attempt to time the market. "The ability to ignore current market conditions is one of an investor's greatest weapons." - William Bernstein, "The Four Pillars of Investing"
- Keep your costs low. Small differences in expenses compound to very large differences in final wealth over long periods of time.
- Get a basic education on investing.

http://www.invest-for-retirement.com has a free downloadable book that will help.

Answer 5

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Answer 6

Buy Low Sell High!

But I go with Buy Dirt cheap, Sell when your neighbor is talking about buying it! A perfect example! I bought AAPl at $14 before IPOD got big, the stock has run up a few %100 for me, now with Iphone coming people think AAPL will double again, everyone scraming buy buy buy! time for me to SELL SELL SELL!

Contrarian thinking will make you rich on the Street!

Answer 7

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http://www.smart-investments.org/Best-Stock-Investments/How-To-Invest-In-Stock.php

http://money-review-site.com/shares.html

Answer 8

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Answer 9

The extremely simple response is: Buy low, Sell High.

Research newer products that you think will continue to excel and take off.

Or go with a secure stock that over time will make you money...and over time I mean 8-12 years.

Answer 10

carry on with your intuition , while the marketplace in Falling , pump in yout funds and while the marketplace is gaining , sell your shares. Make lot of study on companies and rules , which you rather desire to speculate. "dont carry on with the team" Get your self a economic planner like american convey, properly well worth the invoice.