I am presuming that you have a regular job or income of some sort which gives you that spare cash you want to invest in stocks. Why would anyone want to put their hard earned money in something they hardly understand?
Yes! It is true, most retail investors have no clue how the stock market functions (frankly neither do the so called experts). The answer seems to lie in the basic human nature. We thrive on hope. Hope that we will be able to pick up the winners, be it the race course, a casino or the stock market. Greed and the lust to get rick quick is another reason why some people invest in the stock market.
Is the nature of stock market as speculative as gambling? The answer is both, a yes and a no.
YES it is like gambling if you are picking up stocks for investing by throwing darts at the financial pages of your newspaper or on tips of your pals, milkman, grocer to name a few of the experts. When everyone is talking about the stock market and stories of how someone they know made millions by investing in a small time penny stock, it is a warning sign for you to stay away from investing in the share markets. It is better to let your money safely roost in your savings account or pillow cover.
And now the NO part of the answer. Most successful investors do not speculate when they invest. They do their research and pick up fundamentally strong companies. Companies which have a good management, sound business model and products that people need and want. Companies which over a period of time maintain consistent growth and profits.
After buying the stock they are not glued to the stock ticker everyday or clicking away for the latest quote of their stock every 5 seconds.
It is strange but true, If you had spent half the time doing the research that you spend clicking for the latest quote you could have picked up the winners. Point i am making is that spend time in researching a stock before you bet on it. I mean come on, if you want to buy a gizmo (be it a cell phone or Xbox) don’t you ask around, look at the best features and competitive price!
Then Why do you want to invest in a stock just because you like the name of the company or because it is cheap! It might be cheap because the company is not performing and has no hope for the future. Why shirk away from a little work when all the information you need is available at the click of a mouse!
A successful investor needs patience (to let his investments grow), courage (to admit wrong decisions and make corrections and to invest in shares when everyone is selling and to sell shares when everyone is buying) and foresight (keeping the future of a company in sight, learning through research which sectors and companies have growth potential in times to come)
If you think you have the temperament and the patience then you will make money in the stock market, otherwise the best place for your hard money might be your savings bank account.
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