When you first start investing in the stock market you often feel as though you need a guide for stock market investing for dummies, but if you follow a few investing basics, it’s not all that difficult. Stock market investing is nothing more than buying a small share of a business. With that in mind, it gives you a few investing strategies.
Stock market investing for dummies is a misnomer because everyone shops, eats, drives a car or watches the media. You already have an idea of investing strategies if you know a little bit about the products that you use on a daily basis. If you saw a company that offered neat new technology, you might buy the product, or, even better, buy a share of stock in that company. If this was March of 1986 and the company was Microsoft, one share would cost you about $25.00. Now fast forward that to the present time. The shares of Microsoft sell for around $26. You probably think that the investment is awful. Well, instead of one share, you now own 576 shares because the stock split so many times. Along the way you also received over $4.00 per share from dividends, this was after the splits took place. Had you reinvested that money you would have an additional 92 shares. Therefore, at this point, your single share of stock grew to a value over $16,000. That is not stock market investing for dummies, that’s a buy and hold investing strategy.
Buy and hold is one strategy for stock market investing. The problem with buy and hold is that you need to know which company to buy and hold and which company to release because it’s a dog. Krispie Kreme donuts went public in the year 2000 and everyone went crazy for the IPO (Initial Public Offering or when the stock first goes public.). This is quite typical. The price skyrockets and then often drops like a rock, particularly when the company is a craze. Donuts are good, and theirs are particularly tantalizing, but once the donuts saturated the market, they were no longer the novelty that people could only get on their vacation to the West. Today the price of is 1/10th of the original offering price. This one stock could cover several lessons of stock market investing for dummies.
Lesson number one of stock market investing for dummies from Krispie Kreme. Even though you love the product, if it’s a one trick dog, stay away from it. There will probably not be many innovations to the donut unless someone finds a way to make it a healthy coronary disease fighter and at this writing, that isn’t on the horizon. Although, the concept sounds like a delightful idea. People often go crazy when new trendy stock comes out and the IPO’s sell high only to drop later. Look at the type of product and estimate if the demand will increase or new products are on the horizon.
Lesson number two of stock market investing for dummies from the Krispie Kreme example is don’t buy and hold unless you get a bargain. If you bought the stock at $40, and saw it drop as boxes of the donuts hit every grocery store in America, take the short-term loss and dump it. You probably became a little less excited every time you bought another box and began to realize that the attraction for these donuts came from the short supply. Financial investing requires you to make hard decisions sometimes. These decisions sometimes require you to take a loss and salvage the money that you have.
Investing money doesn’t require a lot of market knowledge and stock market investing for dummies simply put is investing strategies designed for ways you want to invest. If you are a buy and hold person, select companies that produce products that maintain a level of consumption and don’t buy when it’s trendy, wait until the price drops. If investing money means buying and selling rapidly to you, learn the patterns of the stock you want to buy or find out everything about the company that you can and attempt to invest before they put out a new product, then sell it when the price goes up.
Stock market investing for dummies is nothing more than deciding what type of investing you want to do, long-term or short-term, and then paying attention to those companies or the way the stock moves.