What You Should Know About Investing in Stocks

When you invest in the stocks of a company, you gain ownership of a part of the company. So it is important to invest in a profitable firm whose shares will grow and give you good returns in time. As different industries have different growth rates and profitability, stocks in companies from different industries will bring varied degrees of risk and returns for you.

This is because the value of a company depends on how relevant its product or service is in the market at a given point in time. For this reason, it becomes crucial to analyze which industries and specific companies are profitable and whether investing in them could be beneficial in the long run. Here are two useful tips on investing in the stock market.
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What First Time Stock Investors Should Know

While many people do not like to gamble, the attraction of the stock market is too hard to resist. The key reason is that with some smart thinking and a bit of luck, you can make a good profit by investing in stocks.

If you are a first-time investor, then you should tread carefully, investing a small amount first and increasing your investments as you become more experienced and understand market trends properly. Here are some of the basic things that a first-time investor must know before buying stocks.

Types of stocks
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Investing in Stocks from Emerging Markets

Emerging market stocks from economies that are growing at a fast rate, such as China, India and Brazil have attracted a lot of investor interest recently. I was impressed by how resilient these economies turned out to be as compared to economies of developed nations during the recession. The growth rate of these countries is also far higher than the growth rate of developed nations. [Read more…]

Stocks Show Heartening Rise as Consumer Optimism Grows

As signs of improvement on the employment scene become evident, the optimism in the stock market appears to be growing too. Increased demand in the service industry is contributing to confidence among investors.

A government report, which was released late last week showed how the employment scenario was finally witnessing a change for the better after a long haul of three subdued years. In March, the biggest job gain in the year was recorded. Although more private employers were seen adding to their employee roll as opposed to the government affiliated organizations, optimism has not been dampened by this fact. [Read more…]

New to Investing Do Trial Runs Using a Mock Portfolio

Various sites such as Yahoo! Finance and AOL allow users to build a mock portfolio online. In a mock portfolio, the user makes imaginary investments in various stocks. These site tools map out the losses and gains on the stock investment of the user, which can later be used for analysis of the investment strategy by the user. It gives an idea of how the investment would have done in the real stock market. [Read more…]

Low Risk High Return Investments

Whenever interest rates drop, people look out for investments with higher returns and low risks. But it is important to remember that all options that will offer higher returns will also involve relatively greater risk.

Take for example, reverse convertible notes or revertible notes, which are financial instruments with returns tied to a stock value. These instruments offer a higher rate of return, but if the stock value drops, you can suffer significant losses. In some cases, even the principal amount might not be recoverable. Yet another example is investing in a bond fund where you run the risk of losing your investment when the interest rates increase. The risk will increase with the term of the bond. [Read more…]

Large Cap Companies Shrink Their Liabilities by 8.2%

Large cap companies on the S&P 500-stock index have shrunk their liabilities by 8.2%. Liabilities comprise of short and long term debt owed by the company, along with other financial obligations like the company’s contribution towards the pension funds. This trend is an indication of how companies have been shedding off the extra baggage to survive better in the hard times. [Read more…]

Common Investing Mistakes to Avoid

Making smart investment decisions is neither pure science nor pure sentiment. It is mostly about keeping things simple and manageable. But it seems that it is easier than done for most investors who end up making mistakes that does just the opposite. The end result is disappointment, poor returns and sometimes even worse. Some of the common investing mistakes that lead to poor results are discussed here. [Read more…]

Investment Lessons from the Financial Crisis

The financial crisis and the painful recession are behind us now. Although the unemployment numbers are still very high, there are many reasons to believe that things will soon start improving on that front too. These have been major events, and it is important to learn from them as an investor.

If you were invested in stocks just before the collapse of the stock market, you would understandably be skeptical right now. Many investors lost their faith in the market and have refrained from investing since then. But you have to put your money in some assets, and as the rebound in the stock market since March 2009 has showed, if you time your investment correctly there are still some great opportunities to earn profits. Here are some lessons that you should take away from the crisis to become a better investor.

Don’t Panic

When the stock market was at its lowest levels in 2009, almost everyone had a pessimistic outlook. More bad news was in store, we were told by the so-called financial experts. But investors who were able to shut out the noise sensed an opportunity and their investments have grown by more than 60% since then. The important lesson is to not go with the hype. Analyze the satiation with a calm mind and try to find opportunities.

Think Long Term

Anyone who tells you that you can make assured quick money in the market either has no idea of what he is talking about or is simply fooling you. In the short term, the market is nothing more than a casino. You’ll win some, you’ll lose some, and then you’ll realize that it was a total waste of time. Keep your investment horizon long term. Treat your investments in good stocks as an asset and not as a bet. You should target modest but assured returns instead of going for risky investments.

Diversify

One of the oldest tenets of investing is still one of the most important. When you invest, you should never concentrate all your risk in a single stock. By creating a diversified portfolio, which also has bonds in it, you spread your risk. So if the price of one of your stocks collapses, you would still be able to make up for that loss with profits from other stocks.

Keep these tips in mind and be smart about your investments. Don’t make investment decisions because they feel right, you need to think them through.