Benny

    Guide to Investing in Stock Market

    Tuesday, September 2, 2008, 01:54 AM [General]

    The first thing to make sure of is to have the money you can invest without worrying of any possible consequences that could happen in the stock market.  Then, take some time to learn what to look for, read and study. Note what business the company is involved in, its rank in the industry, history, size, financial status and the officers of the company. Most stock market trading companies will have this information and brochures for that matter. It is important that you understand, know how to read and analyze the company's financial statements and annual reports. The assets and liabilities are important to know what the company owns and owes. How much their expenses are and how they spend it. It will also show the company’s earnings/profit after deducting costs, expenses, depreciation and taxes from their Gross Income. Good transparency of a company is a favorable characteristic. Basically, it is the reflection on how good the business is and how the people run the company. Buying and selling of shares will therefore really depend on some stock market tips or your understanding and gut feeling. Anticipation should be used if you are aware of business on goings while speculation could be used when there is a particular trend in the market. There are no guarantees in this kind of trading.  Online stocks are available for online trading stock market investing without necessarily going to the actual stock market trading floor.  Trading and price updates online are almost simultaneous with actual updates.

    Stock market trading is involved in selling and buying shares of stocks and bonds of publicly listed companies. Meaning the common people can buy and own shares of stocks but not enough to be called a major stockholder. There are blue-chip shares of stocks and these are mostly of stable and well-known companies. People who invest in blue-chips are looking at the Return On Investments (ROI). This narrates to big dividends, cash or stock, or both. A substantial amount of money is involved for equally substantial dividends paid out in regular intervals. When business and economy is good, the share prices could also increase largely within a short period. If business is bad, share prices would not dive as low as non-blue-chip shares. Investors in blue-chip shares can afford to leave their investment in those stocks for a long time. The stock certificates they hold are very liquid, meaning it could be traded easily in a short period should there be a need for immediate cash. Some financial institutions even accept them as collaterals for loans.

    For stocks not considered as blue-chip, they are those that are traded almost daily. This happens because of speculations that the price might go down for others, on the other hand, those who buy, try to buy low in speculation of a sudden increase in a very near future. These kinds of shares traded and change hand almost everyday are not issued stock certificates. They are termed as shares of stocks with "street certificates". An order and proof of purchase is sufficient to show ownership.

    One of the stock market secrets is the Initial Public Offering (IPO) of a company’s stocks. As the acronym represents, it means the first time shares of stocks of a company to be traded on the floor. Most of the time IPOs give good profits for investors. The common reason behind this is the company has been in good business for quite some time (like Google for example), or, a new company that will go into a very promising business, like say, alternative fuel at a much lower cost. Before being actually traded on the floor, shares could have already been subscribed to, prior to the IPO (there is a term for that I just can't recall). If you are a client close to a stock market trader, chances are you will be one of the few offered for a limited number of shares prior to the IPO.

    Beware though of "enhanced" financial statements like that of Enron, as an example. Some stock market rumors are reliable, but beware of insider trading. Insider traders could cause the price to go down so they can buy as many as they can, knowing it will go up in the very near future. Or, it could be otherwise. They could make a rumor that prices would go up so they could unload the shares they own because the company will be in the "red" within a short period.  Patience is needed to succeed in stock market investment.  Do not go for unverified rumors about some stocks that will hit it high in a short period.  If you have the time, study, analyze and look for reliable references why stock prices would really go up.  Lastly, the best thing to do is buy low and sell high.  Stocks have a history of its prices and you will know the lowest it has gone and the highest it has achieved.

     

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