There is one thing that you need to know about playing the stock market, that at any time the value of the stocks you buy could drop to nothing and you lose it all. Do not base your whole life savings on the stock market. Only use the money you are comfortable in loosing.
When it comes to the stock market and what to buy there are a few rules I follow in buying stocks. When you are investing in a company or business you need to remember one thing, the purpose of a company or business is to make money. The company uses stock money to conduct business and pays a percentage of the money made back to the investors or stock holders. If the company does not make money, you will not make money. If a company or business does not make money it is a good chance it will not stay a company or business. This leads me to rule number 1- Only invest in companies that make money.
Some people believe that the biggest dog in the pack rules. This is true but let’s takes a look. A company that is huge requires a lot of money to maintain the day to day. Slow turns in the economy are a fact of life in the market. The bigger you are the faster you drain your money. Plus how much bigger can you get. That’s why I invest in smaller companies that make less than 1 billion a year. The company does not make as much as others but it is not as effected by down turns in the economy and the company has plenty of room to grow. Larger companies are sometimes as big as they are going to get therefore you can assume they are not going to get that much bigger. Rule number 2- Smaller companies can always grow to be bigger companies, as the company grows so does your investment.
Buy low and sell high. That is the key to making the money. Some people can track the market and make a thousand trades a day and become pretty wealthy. I do not have the patients, nor the time to sit there and watch the numbers go up and down. I look for a solid company that is going to be making money for a long time and grow. I invest for long term holding. Warren Buffet never sold a stock until recently, just kept acquiring stocks and they went up and up and up. In the long run the value will go up on stock because of inflation. Naturally the value of stocks will go up on their own. Rule 3- Buy stocks for long term holding and growth.
Because of the technological age there is a huge reliability on computers and programming. There are a lot of companies making a good amount of money providing programming for different uses. However everything that is written in code can be copied and altered. That is why I do not invest in any company that does not supply something solid. Services are needed and will make you money but codes can be copied and altered and with technology it changes so fast a programming company will be behind the curve in a few years and will not be useful therefore not be profitable. Rule 4- invest in companies that produce or manufacture goods.
I have not figured out any secret to the stock market. My investing has been a hobby as I am a tech geek that loves to find out the new and upcoming. Sometimes I invest in them and sometimes I can’t and wish I could. But I never make a purchase without information. Does the company make money? What are their competitors and are there competitors growing faster? Is the product they make or service they provide going to be needed for years to come? If the economy takes a downturn will they be able to survive? Is there an upcoming technology that will make their product obsolete? There are a lot of questions you have to answer to make the best decision on where you want to invest your money. Just because the stock value is climbing up does not mean it is a good investment. There are a lot of people investing a lot of money knowing that the value will be driven higher. They make a profit and you are left holding the debt when it comes crashing down.