I’ve written this article, ‘Stock Market Investment Tips for Beginners” because I frequently get asked questions from members of Team Sofa and other members of the home business community including:
Jonny, I’m making considerable profits from my network marketing and affiliate marketing business. What should I do with this extra cash?
My response over the years has normally been…..
Invest any profits back in your business!
However, that being said, I would also suggest that you start learning how to invest in the stock market.
Investing your money is a smart way of assuring that your funds are being put to good use.
Currently, it’s estimated that a third of people are investing in the stock market right now. This figure has increased over the years and is expected to continue increasing.
People want to invest because it is a great alternative to keeping money in a savings account that accrues next to no interest.
Don’t get me wrong, savings accounts are great, but they have low interest rates. This means that you don’t gain much on top of the money you’re putting away.
Investments – like putting money in the stock market – have the potential to generate bigger returns. Not only that, but they can help you see returns a lot faster than savings accounts.
Still, there’s a lot to learn about investing your money before you dive into it. So, today, we’re bringing you some stock market investing tips for beginners.
If you are interested in spending money on the stock market, I have some words of wisdom to help you get started.
Let’s start with some basics before we get into the juicy stuff ;).
DISCLAIMER: None of the information that you read on this site can be considered financial investment advice. This information must be taken as written for entertainment purposes only.
OK, now that’s out of the way, let’s proceed.
What is the Stock Market?
You hear people talk about the stock market all the time, and yes, it is the main topic of this post. But, what exactly is it?
The stock market is sometimes called the stock exchange as it’s a place where people come together to buy or sell shares in companies which are known as stocks.
Public companies will issue shares on the stock market for people to purchase as well. There are plenty of stock exchanges across the world, with the three biggest being the New York Stock Exchange, NASDAQ and the Shanghai Stock Exchange.
Back in the early days of stock market investments, individuals would physically go to stock exchanges to buy or sell shares. You have probably seen countless films or TV shows that showcase this, but you don’t have to do this anymore.
Physical exchanges still exist, but modern technology now means anyone can invest from the comfort of their home.
What are shares?
As you progress through this post, you will see the term “shares” come up many times – as you have already seen above. You will also see that we say things like investing in shares or investing in stocks. The two terms are technically slightly different, but most people will use stocks and shares interchangeably to reference what you’re investing in.
Shares are the exact amount of stock that you own in a company. If you say you’ve invested in Apple stocks, it means you own some shares in Apple. However, if you were to specify that you own 10 shares in Apple, it tells people exactly how much ownership in a company you have.
Overall, this isn’t something to worry about too much – just know we’re basically referring to the same thing when talking about stocks and shares.
OK, that’s the basic over.
Let’s get into the juicy stuff 😉
How To Pick High Performing Stocks
There are three principles that you need to follow if you want to have success trading stocks.
If you follow these principles AT ALL TIMES, the probability that you will be successful will be greatly increase.
They are as follows:
- Only buy stocks when the market is in an uptrend.
- Invest in companies that have proven to the market that their management and executive teams have successfully been able to grow the company’s profits every quarter over the last couple of years.
- Buy stocks that large institutions are also buying AND avoid those that they are heavily selling.
OK, so let’s look at three key stock market investment tips in more detail.
1. Buy The Uptrend
Most stocks tend to move in the direction of the market or an index.
What does this really mean?
The world has many indices, some of which include:
- Dow Jones Industrial Average
- FTSE 100
- S&P 500 and many more
If the NASDAQ is going up ,you will find that 75% of stocks in this index will also climb. similarly, if the NASDAQ is falling, 2 out of 4 of these stocks will also fall.
So, your goals shouldn’t be to fight the market.
No, no, no!
The market is your friend and you just need to listen to what she is telling you and always…
Take her advice!
If the market is stagnant which means that it is neither trending upwards or downwards, analysts often using the expression that it is trending sideways.
This isn’t the time to buy new stocks!
If an index or the market is in a downward trend – this isn’t the time to be buying stocks.
Be careful here, people often do what is known as buying the dip – BIG MISTAKE!
This means that they buy a stock when the price is falling because they feel that they are getting it at a discount.
If history has shown us anything it is that buying a stock as its price is dropping can often result in further losses in the short-term and whilst it’s unlikely that a stocks value is likely to go to $0, buying the dip isn’t not a sensible way to invest in stocks.
However, you can use a form of insurance know as an options contract to minimise your losses, but I’ll teach you more about that in another post and in our newsletter.
2. Focus on Growing Companies
Let me ask you a question.
Were you like me and one of many people who were mesmerised by Apple’s iPhone after watching Steve Jobs introduce it at the expo in 2006?
Well, if you were and you have continued to be an Apple customer and pay attention to its growth over the years, you will have noticed a few things.
Consistent Innovation & Growth
What you should always be looking for when picking stocks to invest in, is:
- Does the company have a range of innovative products and services that could have a significant impact on the lives of the masses?
- Does the company have managers and an executive team who have demonstrated their competence by growing the company’s earnings every financial quarter.
Look at Tessa in modern times.
You get the point, the best performing stocks are ones who move the needle.
OK now for my favourite…
3. Copy the Big Boys(or girls)
This was the final of the “3 keys” that I referred to earlier.
Here is something that you need to know.
You need to do what the large institutional investors are doing.
Examples of institutional investors include:
- Mutual Funds
- Investments funds
- Pension funds
OK, so why pay attention to these organisations?
Back to my previous analogy, it’s all about – moving the needle.
These institutions have the ability to significantly move a stock up or down when they choose to buy or sell stocks in their portfolio.
Because the buying and selling power of these institutions is much greater than the average retail investor.
So, if you’ve found a company that ticks all of the boxes such as innovative products and a consistent earnings growth, look to see if and when these large institution investors are buy this stock and….
If you found these stock market investment tips useful and if you want to want to learn more about the strategies mentioned in this post, sign up for the Sofa Salary VIP Newsletter below and I’ve got you covered 🙂
That’s it for now.
Till next time…