Best Financial Tips & Updates

A lot of people like to talk about getting back to basics and making stock market investing as simple as possible, so that more people can feel confident about participating. Although you’re probably a little overwhelmed by all the terminology and strategy that is involved with making smart decisions in the stock market, it’s important to remember that much of the success that experienced investors enjoy is simply a result of them being able to restrain their emotion and allow common sense to guide their decision making. Of course, investors also get a little help from stock market fundamentals.

If you pay attention to any of the television stock picking shows, or online analysts, you’ll hear them constantly referring to the strong fundamental attributes of a certain security. It’s important for you to know what they mean by this, and how important stock market fundamentals are in relation to other attributes, because some analysts will swear that technical merits of a certain stock are the only thing that matters, and you should just ignore the fundamentals all together. Although you might find these concepts foreign to begin with, it’s important to remember that they are not solid rules for trading, just techniques that should be combined into your own strategy.

First of all, it’s important for you to realize that when analysts and fund managers are talking about stock market fundamentals, they are referring to an element of fundamental analysis, which is the method of evaluating the market by looking for potentially significant factors that can affect the value of the stock, outside of its current price movements. Fundamental analysts don’t pay any attention to the trading patterns of the stock, but are instead concerned with outside influences that might be more or less predictable.

Researching stock market fundamentals means that you are concerned with creating an entire profile of the company itself in your mind, from employee experience to financial history. By assembling all these potential factors in their rightful place, investors can start to understand a realistic image of the value that the public and market will associate with the company’s stock. The most important elements that a fundamental analyst will focus on include: cash flow, potential return on assets, conservative gearing, the history of profit retention as a basis for funding future growth, and finally, the soundness of capital management so that shareholder earnings and returns can be maximized.

You cannot directly trade stock indexes, but you should still keep your eye on them. So, what is the advantage of it? Well first let us look at what an index actually is.

An index tracks the market, for example the S&P 500 tracks the 500 top companies in the US. However those companies do in the stock market is reflected in the Index. Other indexes will track different stocks and have different criteria.

Paying attention to these indexes especially the big three S&P, Dow, and the NASDAQ is critical to a trader. So why should you care what these indexes are doing even when you don’t invest into them?

The big reason is that they track the market. They are going to tell you where the easy money is and where the hard money is. For example, if you find stock XYZ and it is giving you a great buy signal, but the S&P is in a huge downtrend that is not a good sign.

While the stock that you are investing into may be giving you a buy signal you are going against the market. That means the odds are against you.

On the other hand if you find that stock XYZ is giving you a buy signal and the S&P is in a huge uptrend then the odds of you succeeding are greatly increased. This would be a much more likely trade to be profitable.

Trading in the same direction as the major indexes is normally a wise idea.

You’ve worked hard and saved money. Now you want those savings to work for you and earn you even more money. The stock market is the easiest and best way to do it, provided of course you know what you are doing.

Here are ten stock market tips for beginners that if followed will lead you to success.

1) Determine your goal. Are you trying to generate an extra income or do you just want your money to grow so you can retire at an early age? Once you have defined your goal, then you can create a trading strategy for achieving that goal.

2) Mutual funds are for the ignorant. Mutual funds have historically underperformed the markets. It is extremely rare that you will ever get a 100% return with mutual funds. Therefore, take the time to learn how to pick stocks so you can easily make double even triple-digit gains rather easily.

3) No one trading strategy will work in all markets. You must have an arsenal of at least three trading strategies, one for when the markets are moving higher, one for when the markets are moving sideways, and one for when the markets are falling.

4) Avoid short selling. Short selling is a strategy used to create wealth when stocks are falling. It is extremely risky and your broker is in control. He can force you out of a losing position right before it reverses and takes off. A better alternative is to invest in Contra ETF’s or Puts.

5) Choose a low cost broker and do your own investing. Full service brokers charge hundreds of dollars to place one single trade while an online discount broker can do the same thing for $5 or less.

6) Before investing real money, practice paper trading your stocks and strategies. “Paper Trading” means simply that you find the stocks to invest in and pretend you are buying them. Once your paper trades make consistent profits on paper, then start trading them for real money.

7) Before buying any stock, always have an exit strategy. The stock market can be rough for beginners. Always have a price you will exit at on the downside or the upside and stick to your plan. After you buy a stock, emotions such as fear and greed can kill your portfolio. Make a plan before buying and stick with it.

At the end of each year, go over your trades. Figure out why the losers lost and learn from it so you don’t make the same mistakes next year.

9) Master technical analysis and you’ll be able to predict the direction of any stock or index with fairly accurate results.

10) As a stock market beginner, you may not have had the time yet to learn (or want to learn) how to pick winning stocks. Use a stock picking service instead. You can find these all over the Internet. Make sure they have a proven track record you can check, and make sure they give you a free trial.

By following these ten tips as I have laid them out, your chance for success in the stock market as a beginner will increase dramatically.