This article is designed to provide guidance on how new investors should approach stocks.
This article is meant for beginners and will be of little or no use if you already have a good grasp of the stock market and stocks in general.
At this point, we would like to remind our readers that stocks do carry risks and losses can actually happen despite your best efforts to minimize them. It won’t always go up and at one point it will go down, so if you want get rid of such stocks you’ll need cash. This may not be the best time to get rid of stocks though since it does tend to be up at certain intervals which means stocks can start going back up again.
To maximize your chances of making money from stocks, you must pick your stocks carefully. research the companies, their fundaments, their stocks’ history etc. There are many stocks that go down when they should be going up and vice versa, so you need to learn how to avoid them.
A good way of knowing if the stocks you are considering are worth buying is if the stocks have a long enough history of constantly rising prices. If it has been on an uptrend recently than your chances of making money increases dramatically. Also, try not to buy stocks with very few shares traded daily since this may mean there is something wrong with these stocks which can actually be pretty bad news for you even though the price might seem really low. This is because stocks with few shares change hands daily tend to fluctuate in value more than usual which can lead to some rather dramatic variations.
Generally, the coffee can method of investing, that is holding stocks for a long time tends to give high returns. Also stocks with high price earnings ratios tend to yield greater returns. Less volatile stocks give better returns than stocks that are very volatile, so stocks like these are advisable for beginners.
Finally, stocks can be bought or sold without paying any tax on your investment. The second you buy the stock, it belongs to you and after that, all capital gains associated with it are yours to keep at no cost whatsoever. This is why stocks come out as preferable for most people who want to invest their money instead of just stuffing it in a bank account since there is little room for them to earn much more than they already do simply because interest rates offered by banks tends to be rather low.