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How to invest in stocks for beginners

How would it feel if you could make a lot of money investing in the stock market, all by yourself? You don’t have to depend on rumors for the hottest stocks or waiting calls from brokers for the ‘insider tips’.

Even better, what if you can beat the market just like your fund managers did? (well, if they did beat the market)

After all, expert investors do start as a beginner before. But how to invest in stock market? Welcome to the world of stock investment.

If you are not sure how to invest money and want to invest to get ahead, don’t start investing until you know some rules of the road. Few things are black and white in the investing world, but you can avoid major mistakes when you invest by following some simple guidelines.

This are some basic tips and tricks on How to invest in stocks for beginners.

Define your investing objectives

Open your eyes and heed the real advice of those that have come before you. Explore our web site, investigate your investments and define your goals and objectives.

Don’t learn trading with real money

Do NOT open a brokerage account and start trading with real money before spending time learning at least some of the basics involved. After you learn some of the basics and feel you are ready to start trading with real money, “DON’T”. Keep learning and wait. Make sure you find a learning resource that you are comfortable with and trust, and that you can ask questions and get answers. Once you have made at least 10 or more successful trades and feel comfortable with your trading plan, consider taking off the training wheels and open a brokerage account.

Do not play… Investing is not a Joke!

You must treat investing as a real job and not as an easy “game” or a “joke.” You must start investing instead of just “playing” and make money fast and now. The final safe investing decisions and the money will be yours and only yours. Don’t get distracted when investing money and don’t try to time the markets.

Practice makes perfect.

In the investment business, paper trading is how we all start. Pick a couple of companies, make a note of their price, the date, the reason why you want to buy them and then start following the stock.

As time passes, the hunch or assessment which made the stock such a great prospect will play out. Was it a good or bad decision? Would buying the stock ‘for real’ have made a profit or a loss?

Increase your Capital Gradually

For those who wish to know how to invest in stocks, investing a small amount initially and then increasing your total investments gradually would be the best suggestion. If you enter the markets with a big amount and make initial losses, then it might reduce your confidence drastically. Instead, slow and steady investing will help gain expertise in the same.

Diversify your Investment

Investing all your money into any one sector or stock can be dangerous, especially when the broader markets are trading in a weak zone. So, if you invest some money in multiple sectors, the chances of suffering from heavy losses minimize greatly. You can choose stocks from the most profitable sectors such as banking, financial services, information technology and automobiles. You can choose stocks from each sector to get dividends as well as benefit of stock price appreciation.

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29. Jan, 2012
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How to make money selling stocks short?

There is a little secret that is totally unknown to the new investor and even the average investor. That secret is that you CAN make money on a stock no matter what it is doing!! To be more specific, I’m saying you can make money if a stock is going up (the most popular way) in price. You can ALSO make money if a stock is staying flat OR even if the stock is going down in price.

Falling markets always cause investors grief. The media reports any selling in a mortally serious tone, while bullish cheerleaders comfort the masses with promises of better days ahead. Negative sentiment usually intensifies right along with the selling, and desperate prayers are offered to the heavens as everyone nervously holds their breath.

Selling stocks short is a simple way to make money when stocks drop. To “sell short” you simply borrow the stock from your broker, sell it, and then buy it back when the price drops. You then return it to the broker you borrowed it from and keep the profit. Yes, it’s perfectly legal!

Normal investors might scoff at the notion of shorting, but highly successful investors and stock traders aren’t normal. While accepting the fact that the stock market will go in whatever direction it pleases, the latest generation of market players knows how to take advantage of the opportunities offered by the down-side of repetitive market cycles. Maybe it’s time for you to consider short selling too.

Make Money on declining stocks by Short-Selling

You can make money when stock prices drop by implementing a strategy called short-selling. You can also buy put options on a declining stock or set up some options spreads.

If the stock is flat you can implement some short-selling options strategies. However, I would NOT recommend flat out buying a put option. Actually, ONLY buying a put or call option on a stock that is flat is a very bad idea and a sure way to lose ALL your investment in that trade.

I cover different options strategies on my site, so to keep this short and simple, I will just focus on the concept of short selling, or you can check out my other article on options.

Short-Selling vs Long Buying

First let’s discuss the differences and similarities between a “short” position and a “long” position. With a long position you buy something today and hope to sell it at a higher price for a profit tomorrow. With a short position, you borrow money to SELL something today and hope to BUY it back at a lower price tomorrow. With both long and short strategies you are buying low and selling high. The difference between the two is that the order is reversed.

Another major difference between short-selling and long-buying is that when you are long you can hold on to a stock forever. With a short position this is technically a loan since you sold stocks you don’t already own. what this means is that at some point you will be “required” to close out your position and in extreme cases you could be “forced” to do so via a margin call.

Numerous academic studies have shown that more than 90% of mutual funds failed to beat market over the long run and that more than 90% of individual investors lost money in the stock market. Too many people and too many Wall Street experts or mutual fund managers are buying and selling stocks like madmen, with no sound strategy or any hope of long term success. Ironically, they’re the ones who create opportunities for prudent, long term oriented investors.

To be successful in stock market, you either have to become an expert yourself or to seek help from real successful experts. Stock market is such a brutal place that there is no room for half-expert or expert pretenders. The truth is that only a small percentage of disciplined and experienced people earn disproportionate huge amount of return, many times at the expense of the rest. It is an insult to “Wall Street expert” professional title when so many of such “expert pretenders” failed to beat index or merely stay break-even

As you can see, you can make money in ANY market condition, you just need to pick the right strategy (and stock) for the particular market direction. The short strategy works perfectly in a declining market because YOU WANT PRICES TO DROP. On the flip side, you do not want to short a stock in a rising market.

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26. Jan, 2012