Archive for the ‘IPO Stocks’ Category

Everyone wants to see growth from their stocks. That is why they take their funds from the bank and start investing them. Many first time investors remove their funds with a feeling of trepidation and anxiety. The stock market is a volatile storm where many drowned.

The first step is to learn how to buy a stock. Many investors jump right in learning investment strategies and adopting techniques that worked for others, before learning the simple steps to buying a stock. Without a good understanding of the rules of buying a stock, it becomes impossible to make the strategies work.

The strategies do work but only when the investor chooses the right stocks for their own portfolios. The strategies do not tell investors what to buy and when to sell. They are only meant to tell investors how to manage their stocks. First, the investor must buy some stocks.

Step #1: Read the Wall Street Journal

The Wall Street Journal is not the only paper that can help investors. The business section of your local paper can often offer tips that will never make it into the Wall Street Journal. However, The Journal can teach new investors the lingo, and the basics of the markets. The more you read, the more familiar the markets become, and the easier it is to research stocks.

Step #2: Pick Industries

No one expects an investor to build a portfolio with a few stocks from mining, a couple from manufacturing, a drug developing company, a foreign natural resource harvester, and a marine biology firm. This is foolish investing. Instead, investors should focus on one or two industries and learn everything they can about that industry.

There are many places to research. Sometimes a simple place like finance.yahoo.com or Morningstar.com can provide all the resources needed to find an industry you will not tire of.

Step #3: Decide How Much to Invest

This is one of the hardest parts of investing. Many people have a set amount to invest. They experience some success and hit ‘pay load.’ Then the temptation sets in. If they had invested $10 000 instead of $1 000, their payoff would have been 10x higher. What if they had of invested $100 000? This type of thinking is dangerous.

Never invest more than you can lose is a nice mantra, but in the real world, resisting temptation is much harder. As the years past, some investors start counting up the intangible money they ‘may have’ earned if they invested more. This leads to frustration instead of joy when a stock does well.

Eventually, they start investing more than they can afford to lose. Then, they lose it -

Step #4: Avoid the Crowd

Some new investors believe the best way to buy a stock is buy whatever is ‘hot’ at the moment. They skip through websites and financial papers until they find something that is ‘hot.’ Unfortunately for them, they have not yet met the Bull or the Bear.

Buying hot stocks is only for people who are able to determine why that particular stock is hot at the moment. Buying on an impulse or gut feeling is just as dangerous. By the time a stock is hot, the ‘real’ investors have already bailed, having made their money, and are leaving before the crash.

These four steps will help a new investor buy a stock which should perform well, instead of buying a stock that bottoms out within a few weeks.

Investing for the future is important if you ever plan to retire. One form of investment is buying stocks in corporations. Stocks represent a portion of a company, so when you buy stocks, you are essentially buying into the company. You can benefit from any profits it makes, but you can also lose money if the company’s performance, or the market as a whole, goes down.

When you look at investing in stocks, you may want to consult a financial advisor who works with stocks and mutual funds for a living. He or she will have knowledge of which stocks you should buy and which ones you should avoid. If you wish to choose the companies you will invest in, look for companies that are growing and offer some stability. Also, if sales in, say, electronics are very high, you may want to invest in a company that manufactures electronics. Take some time to research the stock market before you make your investment decisions.

Once you have decided on some stocks you would like to purchase, you’ll need to pay attention to what the market is doing. In order to benefit the most from your investments, you’ll need to time when you buy, and when you sell, your stocks. If you choose some stable companies and buy stocks in them while prices are low, because of the market or because of a period of time where the company is not bringing in large profits, it is most likely that your stocks will increase in value.

When you are looking to sell your stocks, it is good to set a price for yourself and decide that when your stocks reach that price, you will sell them. Often, people hang on to their stocks, wanting to get the most out of them that they can, and then the market drops and they lose money.

You can see that there is frequent decision making in the process of buying and selling stocks. If you are willing to put some time and effort into your investments, you will be pleased to see how much you will profit from your stocks.

In the long run the economic performance of most countries is showing an upward trend. But, although this is true, the global economy and that of individual countries is always subjected to ups and downs.

Many sectors are especially exposed to these up and down swings.

Building and construction companies, automobile companies or steel manufacturers are all hanging on the economy like a marionette on strings. Large profits are taking turns with setbacks or even huge losses during a recession.

And the shares of these companies and sectors are substantially affected by the up and down swing of the economy. When profits increase in good times, more often than not, these stocks skyrocket disproportionately. But when profits decrease, investors let go of these stocks as if they carry the plague.

OK. You might say that this ain’t a problem. You just buy cyclic stocks when prices are down and sell when prices are up. By low and sell high!

But unfortunately the economy isn’t quite that reliable. Especially not the stock market. If it was that easy to make money with stocks, lottery companies would all go out of business in no time.

There are all kinds of factors that can get in your way like wars, a financial and currency crisis like we had in Russia and Asia in the 90’s. Or oil prices are giving us a hard time again.

So you can’t tell with absolute precission when your stocks have reached the bottom just like you can’t accurately tell when your stocks are at their very peak before the market corrects again.

A nice example for cyclic stocks are General Motors and Ford. The stocks of these 2 companies have performed so badly in the past that they were downgraded to junk status by the rating company Standard & Poors.

The headlines at marketwatch.com read this:

GM, Ford debt cuts take toll on stocks.
S&P slashes automakers’ credit ratings to junk status.

Shares of General Motors slid 5.9% while Ford shares fell 4.5% after Standard & Poor’s cut its long- and short-term corporate credit ratings on GM and Ford to such a low level, that the word “junk status” was out faster than the 2 stocks fell that day.

But what can one expect if you look at the stock charts of these two corporations.

To view the charts, please click the following link: http://www.stockbreakthroughs.com/Newsletters/cyclic-vs-growth-stocks.htm

Holding on to these stocks makes no sense and is a waste of time and money!

Often the reallity with cyclic stocks is, that investors get in to their trade too late and also get out too late. The media is also to blame for this. When the word of an upswing is out, it’s in full swing already. It hasn’t just started. Buying then is senseless for an investor that speculates on buying low and selling high.

And when the headlines scream “Recession”, the bottom of the valley has already been reached long ago. Selling now makes little sense because by now prices are in the red again.

Also with growth stocks there’s no guarantee for the fast and easy buck!

But they have one huge advantage:

In the long run, their prices only point in one direction…UP!

The entry point for a long-term investor is by far not as important as with cyclic stocks. Setbacks are more seldom and, with few exceptions, also not so violent.

A stock like Johnson & Johnson (J&J) or General Electric (GE) is the perfect example for a strong and solid growth stock:

Again, just click http://www.stockbreakthroughs.com/Newsletters/cyclic-vs-growth-stocks.htm to view the charts.

The 3 dips in J&J’s chart and the one in GE was only due to the overall global recession between 2000 and 2003 after the big “Internet Bubble” popped. But while most cyclic stocks are still at the bottom, J&J and GE have long been on their way up again.

These kind of stocks you can always buy without any second thoughts.

In my experience, cyclic stocks will lose you more money and cost you more nerves than you can ever make up for with a few lucky “cyclic” trades.

Yours in Successful Trading,
Ricky Schmidt