stock basics

[bettyallen]

what are the basic stock facts i need to know before investing

[nightdiamond]

Hi bettyallen;

I have a suggestion for a basic thing to learn;

It's called risk management. That is when you learn to sell or let go of a stock even though your thoughts tell you to just "hang on".

Often investors will keep holding on to a stock, when it's losing money, in hopes that it will recover and then go on to make a profit. It often involves emotion and guessing, a lot like the gambling mindset.

It doesn't seem very likely, but once you purchase stock, you might not believe how big the temptation to do this is!

So proper risk management keeps the investor from holding on to a stock while it's losing too much money.

It is basically a way to keep you from losing all your money on a stock, and help you preserve money so you can continue investing and hopefully profit the next time.

It involves terms such as "stop loss" and "limit". There are books available, perhaps at your library and online, that can help teach you about this if you're interested.

Good luck and take care..

[spirit4711]

Originally Posted by bettyallen

what are the basic stock facts i need to know before investing

Go and read Fool.com: Stock Investing Advice | Stock Research

[SatvikBeri]

90% of your gains and losses are based not on what stocks you pick, but your asset allocation, which is what percentage of your investment is in low risk stocks, high risk stocks, bonds, etc. So the first thing you should really do is learn about asset allocation, index funds, and lifecycle funds.

Index funds are one beginner option-they lower individual risk by spreading your investment across several different stocks or bonds.
LifeCycle funds are the ultimate beginner option-they not only spread your investment across different stocks, but take care of what percentage is in bonds, high risk stocks, etc. and adjust over the course of your lifetime, depending on your age and risk preferences. I highly recommend Vanguard LifeCycle funds for 95% of people.

If you want to invest in individual stocks, be willing to spend more than 20 hours a week looking at stocks to find good deals. Even then, you will probably underperform the market-most professionals do. So it's rarely worth investing in anything other than index funds or lifecycle funds.

[pjhaggerty]

I have a few answers to this question.

one, the cheeky answer: You don't need to know anything. The investment industry will be happy to invest your money for you without sending you to take a test on any stock basics at all. There is no baseline knowledge needed to invest in most stocks, although sometimes there is a base net worth or amount of investment capital needed to invest with certain mutual funds, hedge funds, and financial services companies.

two, the I need more information answer: It depends on your goals. If you could tell us what you are hoping to achieve from any investment program you do eventually develop in terms of return, time investment, and risk levels then it could help us make better recommendations of what areas of the stock market to investigate.

three, the general knowledge answer: If you just want to learn more about the stock market in general, there are several free online resources that could answer most of your questions. Wikipedia probably has a lot, although a more authoritative source would be 'investopedia' which is a forbes company and has a lot of great information covering everything from basics of the stock market to advanced forex options hedging vehicles like binary options. There are also several magazines, newsletters, etc. who will all be happy to charge you to teach you the same information.

Fourth, the become an investor answer: If you want to actually become a good investor, I would suggest reading the benjamin graham book 'the intelligent investor' which should answer most of your questions. Make sure you get the most recent version as it has footnotes explaining some of the terminology and updating the concepts to apply them to the present day, as the book was last updated by it's original author in 1973. If you are looking for a more modern, applicable investing strategy, I would recommend checking out 'rule no. 1 investing' by Phil Town, another great book on value investing that is very modern day (it was published after 2000) and has a 'straight out of the box' investing strategy you could start applying right now.

I hope that helps. If none of that was what you are looking for, perhaps you could re ask the question with more details so I could direct you to some better resources for your particular situation.

[pjhaggerty]

Originally Posted by SatvikBeri

If you want to invest in individual stocks, be willing to spend more than 20 hours a week looking at stocks to find good deals. Even then, you will probably underperform the market-most professionals do. So it's rarely worth investing in anything other than index funds or lifecycle funds.

Most professionals underperform the market because of several constraints put on them as 'professional' investors. It is possible to outperform the 'professionals' if you understand the advantages you as an individual investor have over them and devise an investing strategy which will take advantage of those advantages, instead of one that relies on beating the professionals at their own game.

Also, there are 'professionals' who out perform the market consistently over several years. I would suggest reading some of jack schwagger's books, the market wizards series, to see what that takes. these books interview these people, who have several different investing strategies, yet all beat the market averages. It is both inspiring and intimidating to see what these people do to beat the market.

Beating the market is definitely not for everyone, and a lifecycle fund is generally a solid investment vehicle for those who do not wish to put forth the effort to truly understand and beat the market. However, that does not mean that beating the market is out of your reach if you are really committed to doing so and can put forth the effort necessary.

[ouyang]

investopedia.com has full tutorials from the basics up. I'd have a look at the articles on there. Good luck and have fun!