February 23, 2018

What’s your strategy in buying stocks?

The Bombay Stock Exchange, in Mumbai, is Asia'...

The Bombay Stock Exchange, in Mumbai, is Asia’s oldest and India’s largest stock exchange (Photo credit: Wikipedia)

Buying shares is a form of investment that one does for the purpose of reaping future profits. By so doing, people who buy shares are called investors.

Yes! Thousands of stocks are available for purchase at the stock market. The question is how do you go about finding the right ones to buy? Findings have shown that a lot of investors at the stock market are speculators.

A speculator is a trader who approaches the financial markets with the intention of making a profit by buying low and selling high (or higher). The speculator is distinguished from the investor, who approaches the financial markets with the intention of making a return on his capital and does not try to predict the ups and downs of the market. In simple terms, the speculator is interested in price action. The investor is interested in dividends.

According to Howard S. Katz, “The problem with many people trading in today’s markets is that they are speculators but do not like to admit that fact and persist in calling themselves investors.” Purchasing stocks is historically one of the best ways to make your savings grow. However, investing in stocks is not without risk. As a stockholder, you are part owner of a company. If the company performs well, your shares are likely to provide a good return on your money, but if the company fares poorly you, as an owner, will probably lose money.

For the novice investor, the keys to success are to identify your investment goals, develop an appropriate investment strategy and learn how to properly research stocks to maximise your potential profits and minimise losses.

Before you begin to buy stock, clearly identify your investment goals. You may be interested in growth stocks to build the size of your portfolio, or you may want to focus on high-dividend stocks that produce income with low risk even if they have less growth potential.

While millions of investors ply their skills in the stock market each year with the hopes of picking a winning stock, they have two things in common – all trying to make the largest profit in the shortest amount of time; and trying to do so by predicting that the future prices of the stocks they purchase today will be higher tomorrow. Yes, the higher the better!English: Phillippine stock market board

What advice for the novices? W. D. Adkins said: “If you are a beginner to buying stock, you are well advised to stick to the basics while you learn to select and invest in stocks and to avoid more exotic trading methods. Stock options and futures, along with techniques such as margin buying and short selling, all carry much greater risk than conventional stock purchases. The same is true of short-term strategies such as day trading and swing trading.”


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