Knowledge Central: Your source for StockSpotify’s latest research and ideas
If you’re entering the world of stock trading, you may be aware that you’re entering a volatile market. And it’s a difficult market to navigate alone. That’s why we’re here. With StockSpotify, you’ll have access to constantly updated stock market tips. You’ll have the right perspective on the market, and you’ll find your portfolio full of stocks on the rise. That’s also why we’ve gathered a slew of tips — all organized for your current experience with the stock market — that you can utilize as you begin to navigate the world of stocks. Please feel free to read on:
Beginner’s Tips
These tips aim to aid those just getting their toes wet in the world of stock investing. Read on if you’re entering the market for the first time, or scroll down to read intermediate tips on investing.
Use Money You Have
If you’re looking to invest money, make sure you have the money to invest! It’s a simple tip, but one that, too often, is overlooked. Invested money should be saved money. It should be money that wouldn’t go towards paying your standard bills (house payments, heating, car payments, etc.). This should be excess money you have that you’re prepared to invest. Remember, there’s always a chance you lose your investment when entering the stock market.
Stock Trading Is Easily Accessible
The days of finding a stockbroker are gone. With online stock trading and tools — as well as support — you’ll find that modern stock trading is easier and faster than ever. Now, it’s time to make mention that this doesn’t mean you’ll need to — or even should — hop online everyday to make trades. If you’re a beginner, you’ll want to start small with your initial investments, and build your portfolio as you gain confidence and knowledge about the stock market.
Opt for “Limit Orders”
Limit orders are a simple tool you can utilize to ensure that you get the stocks you want at the price point you want to pay. You can also use a limit order when you go to sell your stocks to ensure you receive the amount of money you expect. If you don’t place your trades with a limit order, your stocks will be traded at market cost. Market cost will likely be higher than the cost you want/expect to pay to buy stocks, or lower than the amount of money you want/expect to earn when you sell stocks.
Go for Great Companies
When you’re entering the stock trading world, you’ll be bombarded by literally thousands of companies in which you can choose to invest. Don’t put your eggs in a basket that you’ve never heard of. Place your investments carefully. Place your investments in businesses that you see as successful and growing. Avoid companies that are stagnant or on the decline. Above all, do research before you throw (or place) your eggs in any basket. Read current news on the state of a company, and check up on their quarterly dividends and rates of growth. Moreover, count on StockSpotify for stock tips and investment ideas. That’s what we’re here for!
Your Investment Might Not Pay in a Day
Remember that the stock market rises and falls, and it changes every day. Don’t get caught up in the unnecessary drama of a day’s momentary change. Don’t flee when your investments drop a bit, and don’t sell at the first sign of profit. This is an investment, and with an investment, you’ve got to rely on the future. Sure, it’s an uncertain future, but you’ll save yourself lots of strife (and money if you’re trading too often) if you allow yourself to wait until the perfect moment to buy or sell. Keep up with StockSpotify, we aim to let you know right when investments are ripe for the picking.
Diversify Your Portfolio
Again with the metaphors, but you won’t want to put all of your eggs in one basket (one company’s stock), and you won’t want to put all of your eggs in at the same time. Instead, invest on a good timeline. Place a portion of your investments into the market. Let it settle, or rise, and then invest in a second company. Remember, you’ll want to diversify as well. Don’t choose too many stocks in the same industry as one another. If that entire industry takes a hit on the stock market — your entire investment will suffer. Pick and choose industries that are on the rise, and pick your individual company picks wisely! Again, study up before any investment you opt for.
Go For a DRIP
So, there’s this option out there called a DRIP. DRIP stands for Dividend Reinvestment Program. When you’ve got enough stock invested in a company that shares dividends with its stockholders, you may be able to opt for a DRIP. Often, DRIPs are an excellent choice because you’ll earn more and more stock with that company. Your dividends will be reinvested as new shares of stock. The concept behind a DRIP is analogous to interest. When the day comes that you do sell your stocks, you’ll have more of them waiting to be sold. And everyday up until the day you sell, your investment will be growing. Now note, some stock trading companies don’t offer DRIP investing as a program, namely Scottrade. You’ll want to seek out a stock trading company that has the option — TradeKing as well as E-Trade are just a couple of options.
Adjust When Appropriate
Adjusting your investments is a rather murky subject, but it’s important to consider as your portfolio changes. As we’ve noted, you’ll want to avoid making too many trades over the lifetime of your stock portfolio — you’ll likely waste money on trading fees and unnecessary losses. However, if a stock is booming and you’re ready to secure that profit, it’s time to sell. Only you can make the decisions surrounding your portfolio, and adjusting that portfolio appropriately may take some learning.
One more note on adjusting: make sure that all of your eggs don’t end up in one basket. If one of your stocks skyrockets and the others stay stagnant or drop, you’ll have the majority of your wealth sitting in one place. Reinvest that portion of your portfolio in new stocks or stock that has steady, calculated growth.
Profits Only Exist After You Sell
Remember that no stock market investment is a guarantee for profit. There’s a reason we call it playing the market; ultimately, it is a gamble. That said, there’s plenty of opportunity for growth and ‘winning’ investments. But overall, the only profit you make is the actual money you take out of the stock market when you sell stock. At all other times, stocks are still stocks, not money — and they’re liable to rise or fall.
Determining the right time to sell is crucial. Ask yourself, do the risks associated with maintaining your investment as stock outweigh the rewards of selling that stock? Note that the only way to reap the benefits of your investing is to take that investment back off of the market, so do so when you feel your investing is ripe and the time to take the payoff is now!
Intermediate Tips
Alright, you’re a part of the stock market, and you’re looking to hone your stock trading skills. Feel free to browse through our intermediate tips to give yourself an extra edge; and as always, count on StockSpotify for our expert advice and our continually updated stock tips.
Buy on the Right Days
When your about to make an investment, you’ll want to buy on the right days. Learn more about the best days to join the market here.
Own Your Shares
Remember that your stock investments mean that you own part of the company you’ve invested in. In this way you’re partnered with that company. Take that role seriously. Track company profits and numbers. Monitor quarterly numbers, keep up with their news, and get to know the company. You’ll find that you have more predictive power and confidence in your investment when you treat the company you’ve chosen to support as a partner.
Anchor Wisely
Experts speak about a price “anchor” when they speak of stock investing. A price anchor describes a fixed price that one might associate with a stock. Often investors place a faulty price anchor on their initial investment. For example, I payed $32 per share for so-and-so stock, so it is anchored at $32 per share.
Avoid this mindset! The poorly-named price anchor actually moves for an individual stock. A price anchor describes the price that a stock is sitting at on average right now. Try to be conscientious of price anchor changes, as they may notify you of the right times to buy or sell. For example, let’s say you’ve wisely invested $32 per share for so-and-so stock whose price anchor you believe is set at $40 per share. You’ll likely see around $8 per share of growth. Now let’s say that the price anchor raises to $50 per share due to a recent development in the company. You’re likely to see a further $10 per share increase, and though you’ve made a profit already, you should wait for your stock to hit or surpass the price anchor before you opt to sell your stock.
Note that price anchors raise and lower all the time and are often consequences of major company product breakthroughs, company hirings or firings, or quarterly reports among many, many other things. Pay attention to the events that may trigger a price anchor shift, and plan accordingly!
Think Product Market, Supply & Demand — Not Management
A company lives and dies on the products or services it sells. Most of the time — regardless of the higher-ups of a company — a company’s success depends on supply and demand. It’s simple economics. A company can still post great numbers with poor management, and those are the numbers you’re counting on for the success of your investment.
Think of it this way: would you rather be on a boat that’s afloat with a captain who gets lost once in awhile, or a boat that’s sinking with a captain who knows the right route?
History & Surprises Happen & Happen Again
We’ve all heard the old adage, “History repeats itself.” And the same is often true in the world of stocks. Now, there are bold surprises, big irrevocable changes that can occur within a company. But more often than not, a company will travel through similar revolutions over time. Be conscious of patterns in a company. Is there a time period where the company thrives, and a time when it’s stagnant? Was there a revenue spike after that large hiring event last year? You can’t rely on this information alone, but it can aid you in making an educated investment.
The same holds true with surprises as histories… they repeat themselves. Be cognizant that a company may endure the same surprise steep drops from time to time — and be aware that they have historically bounced back. Consider investing when you note one of these drops and selling once the true price anchor is met or exceeded again.
Short Selling Is a Viable & Possibly Lucrative Option
When you short sell on a stock, you’re betting that the stock price will plummet. It’s a risk, but you know by now that any stock market investment has its risks. The strategy is the same, know your company, its industry, and the market. If you foresee that a company is in danger of losing stock value, it may be time to capitalize. Opt for a short sell only on the most certain market losses.
Invest for Your Goals
Your investments should reflect your financial goals. If you’re looking to make a larger sum of money and you’re young enough or adventurous enough to take risks, you can consider a riskier portfolio — that is, stocks that might lose money, but may prove to be big winners. If you’re nearing retirement and you’re looking for stocks that will lend you steady returns, go for stocks that you have pure confidence in. At the end of your stock investment, you’ll need to sell all shares, and you can consider bank investment options that are a complete guarantee. Note, stock experts often call the former scenario long term investing; and the former are considered short term investments. Long term investors are generally considered investors who have 5 or more years to place their investments. Short term investors have less than five years to see their investments come to fruition.
Regardless of your goals, you’ll want to diversify. We’ve made mention of this before, but diversifying your portfolio and your investments protects your investments as a whole, even if one of your stocks takes a dive.
Value Stocks
People know the phrase, “buy low, sell high.” But there’s something to be said for buying high and selling higher. It seems odd… why buy high when you can buy low? Get more for less right? Well, a stock’s price speaks to its current validity in the market as well as the trust investors place in that company. If a stock has a high price, it’s a strong stock — that’s why investors are willing to pay for it. If it’s a cheap stock, it may be on the decline, or it may mirror the age of the company. All said, the value of a stock speaks to its viability. You can opt for stocks with low value and stocks with high value — just know that high value stocks are more likely to hold their value and rise consistently.
Always On the Rise
Playing the stock market is a mental exercise. You’ll need to keep calm as the market dips and turns. Keep an even keel even when you make a great sell on a chunk of your stock portfolio. Too often, investors will sell more stock than they need to, simply because they’re making a profit overall. Mind that you stay cool, and ensure that you stick to your guns when it comes to selling and buying stock. Buy when you’re ready. Sell when it’s most profitable.
Seek Out Industry Leaders
At StockSpotify, we’ll keep you posted on industry leaders. What are industry leaders? Simply put, these industries are booming. Pay attention to industries that are earning the best profits, as you’ll find companies within those industries that are worthwhile investments. That’s the power of StockSpotify. We’ll connect you with industry leaders, and we’ll keep you posted on select companies within those industries which are likely to thrive!
