Many individuals have claimed that the stock market is no longer the money maker that it used to be. They also say that the only good way to earn money these days is to put as much as possible into savings accounts. To the contrary, however, it is still very possible to make money by investing in the stock market. Obviously, you won’t be the next Warren Buffett, but you can make a fairly large amount of money through stocks. All it takes is some smart investing and a little bit of money to do so.
Step 1: Research
Before a person even begins to think about investing in the stock market, they have to think about what they want to invest in. They must do some research to make these choices. Research means more than just sitting down for an hour and looking at different stocks. Honestly, a person who puts hours and hours into investing will probably end up making the most out of their investments. The importance of thorough research cannot be overstressed when it comes to investing.
For example, consider automobile companies:
* General Motors
During the economic recession, GM took federal money to avoid bankruptcy. Toyota recently recalled millions of vehicles around the world for brake problems. On the other hand, Ford avoided taking federal money, didn’t go into bankruptcy, and has slowly been improving its image for a couple years now. Sadly, the stock value of each company won’t reflect this information outright, but Ford would be a better choice to invest in over the long term because it is already building a base for stability. You can easily see how research is extremely important.
Step 2: Amount of Investments
You must carefully consider how much money you are willing to invest in the stock market. Without a doubt, it would be an exceptionally bad idea to invest a large amount of your income into the market. A small amount of money, however, is not a bad idea. Most people can afford to invest a few hundred dollars per year, which is a completely reasonable amount. Obviously, you shouldn’t be investing all of your money into a single stock because that’s just a great setup for failure and money losses. It is best to invest in a wide variety of stocks over many different industries because this will help gains and losses balance each other out.
For a small-time investor, putting around $500 into a portfolio each year is a pretty good idea. The only point to make when it comes to the amount of money you invest is to make sure that it doesn’t put any burden upon your ability to pay bills or take care of yourself. Obviously, the stock market is not a game, and neither is overspending your money. It’s best to invest a little bit at a time to avoid overextending one’s finances.
Step 3: Stay in the Game
One of the biggest mistakes investors make is to sell their stocks as soon as the market goes sour. Unfortunately, this is an extremely poor move because the stock market fluctuates all the time over a short period of time. In the long run, however, good stock choices will usually earn money rather than lose it. Most people don’t realize this and let themselves sell for a loss that could be an earning in a few months. It’s a good idea to keep most investments in the market for at least a year – the longer, the better. Also, stocks with dividends are best to keep in the market for as long as possible because dividends are a great way to earn extra money over a long period of time. Many stocks provide dividends, but it’s still smart to keep all stocks in the market for as long as possible, as long as they don’t become a total loss for the investor.
Step 4: Know When to Sell
When it comes to certain situations with stocks and other investments, there does happen to be a right time to sell the investments. Most people hope that they’ll be selling their investments for a gain, but it will sometimes end up as a loss. If the market measures indicate that a stock is about to go bust, then it’s a pretty good idea to sell off those investments. Hopefully, the stock will still be in the black when you sell it so that you can earn a profit. You just don’t want to have the chance to sell for a profit but end up selling for a huge loss. Bad news for your investment companies won’t normally destroy the stock’s price, but exceptionally bad news can do anything. Simply put, just know when to sell your stocks: it’s usually fairly obvious when a stock is in trouble.
By following the time-tested and proven strategies for investing in the stock market, a person can still earn a profit on their investments. It isn’t as impossible as economists have proclaimed in recent months. The stock market is still a viable place to earn good amounts of money, so you shouldn’t rule it out now or ever. In fact, the smart and strategic investor can still hope to make a high amount of profits from the market throughout the foreseeable future. Economists may have lost hope in the ability to make a fortune off the stock market, but the possibility is still there for the smartest investors. Luckily, you don’t even have to be an investor with millions of dollars available – even small investors can earn a good deal of money from their investments.