Introduction
Stock buying is a great way of investing, however, like any other investment there are potential risks involved. If the company you invest in performs well, then you get a good return on your investment. In the case that they fair poorly, you stand to lose. There is no formula per say in stock buying, however, it is essential to have clear goals and a winning strategy. The following stock buying tips will also come in handy.
Step 1
1. It is important to set your investment goals and have them on your finger tips before you begin stock trading. There are various stocks that you can choose from. You may decide to focus on growth stocks which will help you to increase your portfolio or you may opt for high-dividend stocks which are low risk and have less potential for growth. It is wise to pick which sectors in the market you want to invest in. it is hard to keep tabs of all markets, hence it is better to go for a few that you are familiar with.
Step 2
2. Having a strategy is very important in stock buying, always buy what you know. It is ill advised to rely on speculation that a certain stock price is likely to go up. Friends and stock brokers may share their opinions with you but at the end of the day go with your gut feeling.
Step 3
3. Never worship charts or take them to be the gospel truth. Technical analysis should provide guidance on when to invest on the type of stocks that you had planned on buying. However, do not rely on them 100 percent when making stock buying decisions.
Step 4
4. Avoid too much trading. Contrary to common belief, overtrading does not necessarily meant that you will get higher returns. It is important to also sit back and watch the trends in the market. Frequent trading is a major gamble which could ruin you especially in the midst of this shaky economy.
Step 5
5. One of the greatest stock buying tips is to buy and hold. Most people immediately sell their stock once they go up by even 5 percent. If you hold on to your shares you can get over 50 percent gains in future. Wait for the stock to reach its full potential before disposing it. This way you will also earn maximum returns.
Step 6
6. Do not over diversify. Again it is best to invest in what you know. Stick with a few good stocks, preferably 5. It is better than investing in 20 random companies that you are clueless about. Having few stocks also makes managing them easier and you are likely to make intelligent stock buying decisions.
Tips
Wise stock buying involves a lot of research; take time to study current market trends and the strength of the companies you want to invest in. Look at their asset base and liquidity. Always stay updated by reading financial news on the money market and your stock buying skills will keep getting better with time.
Sources and Citations
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