During difficult economic times like this, those who were wise enough to prepare for them make huge gains in the stock market. Part of that preparation is creating a plan and then implementing it. For smart investors who are willing to be disciplined in their approach to buying and selling stocks the stock market presents a fantastic opportunity. When you as an investor are ready to take advantage of opportunities in the market, understand your plan for those opportunities, and can stick to your plan then there is a lot of money to be made through investing in the stock market.
Points when the economy and or the stock market have taken a downturn have historically been times when millionaires are made. People who are wise enough to have cash reserves are able to strike as equities they watch become good values. These people have spent hours reading through company reports, researching online, and discussing the numbers on companies they believe are good investments. These people know an opportunity to make significant gains in the market will appear quickly and must be pounced upon because it can vanish just as rapidly as it arises. Time spent creating a plan for purchasing stocks establishes a firm foundation upon which to buy, hold and profitably sell those stocks.
Once the plan is created it must be put into place. No plan is without its flaws and only when we begin working through a plan do those flaws surface. With a plan in motion the wheels begin to turn and situations not thought of come up. If your plan isn’t thoroughly understood and thought through you will not be in the best position or the safest one, when the need is greatest. Plans are great and make life much more predictable, but plans that are not fully understood do not provide as much security as they could.
With a plan in place and in motion the most important trait of the successful investor comes into play, discipline. As soon as your first stock is purchased something will come up that is going to try and entice you off-track. Don’t let it. If your plan is sound it will bear the fruit your research has demonstrated it will. If the plan isn’t sound make adjustments. Unsuccessful investors often get derailed from their carefully laid plan only to watch it fail. Then they tell stories bemoaning what might have been. Don’t lament what you might have been able to do because an opportunity ‘too good to pass up’ came along.
Why get into the market now? You should get into the market now because wise investors can make money in the market right now. The operating word there is ‘wise’. Do not place a dime of your money into anything you can’t explain in three minutes or less to someone else. If you can’t talk for three minutes about your investment plan; then you haven’t planned enough, don’t understand it well enough to implement it, and haven’t mastered the discipline to create it and stick to it yet. These three investing attitudes will form the basis for what is termed your investing philosophy and it should guide everything you do in the stock market.
Now that you’ve created an investing philosophy how do you get into the market? The media is inundated with ads to put all your trust into this brokerage firm or that one, or open an online account with various companies. What should you invest in? Open enrollment talks about mutual funds but the investment club is always presenting companies that are traded on one market or another, and what are these things called pink sheets or penny stocks?
There is a dramatic difference between what you will pay for and can expect to get from a full service broker verses an online trading account. The full service broker is a human being who works for you. He or she gets paid usually when they buy or sell stocks for you, and it’s called their commission. Sometimes their fees are built into the things they sell in which case it might be called a load. They earn these fees because they are supposed to be there to answer your questions, understand your needs as a client and help select investment vehicles that serve you best. The bottom line here is they do almost all the work for you to earn their money, and their cost is significantly higher than an online account.
On the other hand, the online brokerage account in its most basic form simply allows you access to tools to evaluate securities, equities, commodities, and mutual funds. The online account also lets you place orders for these things at a dramatically reduced cost. The draw back to the online account is twofold. The online account is usually delayed by up to 20 minutes and the investor using the tools provided must do all the work.
With your investing account now open let’s examine some of the things you can now purchase. Mutual funds are a great way to get that vaunted diversification in a single purchase. Buy one item and you have instant diversification. That’s because a staff of people investigating and researching everything inside any particular fund manages a mutual fund. You buy the fund that owns a portfolio of stocks bought around a theme. As that fund goes up or down the portion you own goes up or down as well, which you can buy or sell as if it were a single stock. There are a large variety of companies who specialize in researching mutual funds and can provide you with reports on the performance those funds as well. The advantage here is a downturn in a single industry or market doesn’t destroy your holdings.
A single stock is just that, a share of a single company. Usually investors research these companies on their own, and there are a variety of ways to do that. You can get a copy of the financial reports for the most recent quarter and year from almost every publicly traded company just by calling their investor relations office and requesting them. They will usually be happy to mail these to you, free of charge. There are also countless books written on how to evaluate these reports, crunch the numbers, and decide if they are good investments or not. For many investors these are the fun things to buy because when you find a good one bragging rights are yours. However, if you recommend a bad one to your investment club you get all the blame too. These holdings contain more risk, as each stocks value is dependent on how well that one company can do.
Penny stocks or pink sheets are those equities that trade for less than five dollars but traditionally for less than a dollar. Of the three investment vehicles we’ve discussed to this point penny stocks are the most risky, but they are also the most easily accessible. They are accessible because you can practice big purchase strategies with vastly smaller amounts of money. Penny stocks are a great place to get your feet wet in the investment game but make sure it is done with risk capital and not the grocery money.
Regardless of how you get involved in the stock market right now is a great time to do it. Whether you’re a seasoned pro or went to you first investment club meeting and want to learn more you can do it. The key to your success is thinking before buying. Devise a plan, put it in motion and then stick to it. Reevaluation of how your plan is working allows you to make adjustments to do more of what is working and less of what is not. One of the easiest ways to get help with your plan is to find a trusted online community and join. True learning comes in the asking of questions and the discussions that follow. Never be afraid to ask even what appears to be the simplest of questions. The quality people in any community won’t mind explaining the basics to you, and those who take offense or are rude just identified themselves as folks to be avoided. Today’s stock market is a great place to build wealth and have fun while doing it. All you have to do now is start on your plan.