Investing in stocks is something everyone has heard about, and some people do invest in stocks, however most do not. Today with the internet, computers, and smartphones, buying and selling stocks is easy. But it can be scary if you’ve never done it before.
The dangerous part of investing in stocks is that it can be like putting all your eggs in one basket. If your stock goes down you lose. The advantage of investing in stocks is the potential for great gains and huge profits “if” you pick the right stock(s).
Note: Remember with ETF’s (Exchange Traded Funds – a group related to stocks) and mutual funds you have a level of diversification and safety built in.
One of the challenges of investing in stocks is controlling your personal emotions. Basic human nature too often prevents us from letting go of a stock. Just look at how much stuff, over the years, most of us have stashed in our garage, closets, and basement. This is stuff that never sees the light of day because we really don’t need it, but letting go is so difficult. The same thing happens when we buy stock in our favorite company and it just kind of muddles along or worse yet, it goes down, down, down. WE don’t want to give up and sell it; we hold out believing it will become popular again and go back up. And it may…. In two, or five, or twenty years, but that doesn’t help your wallet today. If you want to invest in stocks, two of the biggest challenges you’ll have to take on is controlling your emotions and being willing to both buy and sell, keeping in mind what is best for your wallet and not necessarily your heart’s desire.
Key factors to consider for safe investing in stocks include:
- Can you put a non-emotional decision-based system in place?
- Are you wiling to use other peoples’ work to compile a list of potential stocks?
- Can you keep your portfolio manageable?
- Can you keep your portfolio diversified?
How do you use other peoples’ work to put together a list of potential stocks? First, this does not mean talking to your neighbors or family or friends about what stock they like. It does mean, use of reliable professional sources of information to create groups or potential stocks.
These sources include (but are not limited to):
- Kiplinger’s Magazine
- Money Magazine
- Investor’s Business Daily Newspaper
- Today Newspaper
- The Wall Street Journal
These sources are constantly publishing lists or articles about companies with growth potential. You can create groups of stocks based on their suggestions from which you can pick one or two stocks for investment. I actually have a “Kiplinger’s” group of 18 stocks. You can do the same from any of the above sources (or others of your own choice).
You can also create stock groups base on industries or sectors such as:
- Banks or Finance
This kind of list is almost endless.
Once you have your potential groups of stocks or individual stocks, then you’re ready to set aside your emotions in order to make your final decisions for investing.
Here are the basic choices you’ll make when deciding which stocks to buy:
- Take to heart suggestions from an investment newsletter, newspaper, or magazine
- Use computer investment software based on complete technical analyses
- Use an investing company’s fundamentals
Can you do this? The key is to pick a time-proven method and to sick with it… and leave your emotions at the door.
Dominick is the designer of the investment program Dynamic Investor Pro, an investment software used by individual investors and professional investment advisors for stocks, ETFs or mutual funds and the author of the book, Invest Safely and Profitably.