A Short Guide on How to Invest in the Stock Market Wisely
Even though a large segment of the general population knows about the stock market, and even have invested in it, they do not necessarily know the best practices to follow when investing in it. In this short guide, we will talk about how you can be a more successful investor. Investing in the stock market is complicated due to the many factors involved in it, so one needs to be very informed about it. That is why we start with our first point: about educating yourself about the market.
The stock market is an open market, which means that anyone can buy shares. This directly implies that there is a lot of competition in the market to get the best results. The result is that a lot of investors are going to lose to the investors who make the better decisions. Even if they do not directly lose, you may see less growth in your portfolio than others. If you do not want to be among this group of investors, you should educate yourself about the different types of investing strategies.
Value Investing is one of the most popular and effective strategies, and is followed and recommended by legendary investor Warren Buffet. It was first explained by his guru Benjamin Graham in the book The Intelligent Investor. This book is a must read for anyone who wants to understand and invest in the stock market.
Another successful investor who wrote about investing was the mutual fund manager Peter Lynch, who wrote three books on the subject. His book One Up on the Wall Street is a very good introduction to investing in the stock market. There are many such books, and you should read as much as possible to learn about the market so that you can make the best investing decisions.
How to Research Companies
After you have learned about the different investment strategies, you will need to find the best companies that you can invest in. A typical stock market, whether in Australia, USA or any other country, has thousands of publically traded companies. Choosing the ones that have the biggest potential for growth is far from a trivial task. However, you can reduce the scope of your work by focusing on one type of industry, such as Oil or Information Technology. Even in the best case scenario, you will still need to research dozens of companies to find the ones that show the best potential for growth.
With the growth of the Internet and literature on the subject, today it is very easy to research companies online. Tools like Google Finance allow us to select shares of companies depending on their price growth, and dividend paid out. More complicated tools are available with professional brokers. These tools will definitely make it much easier for you to do your research.
When you want to buy and sell shares from the stock market, you have to use the services of a stock broker. In the past, stock brokers used to take orders on phone. Clients would call the stock broker, and place an order to buy or sell. However, this cumbersome system has now been changed by the use of Internet. Today, you can place any order on the internet by logging onto your brokerage account. Brokerage sites also allow you to use different types of tools and services so you can make better investment decisions. In this regard, it is important to choose a broker whose tools are more useful for yours style of research. Further, when selecting a broker, make sure that their fees are reasonable. In Australia, we have observed that Etrade.co.au has one of the best collection of tools for investors. So if you want to buy shares in Australian stock market, you should definitely check out their site.
In this article, we have stressed on the importance of informed research before buying shares. The actual process of buying shares is much simpler; what is complicated is what you have to do before you decide what shares you have to buy. As long as you make wise choices, you will get the best results from your investments in the stock market.