How do we start to invest our money into the stock market? Understanding the several investing styles is the first step. Its difficult to get there unless we know where we're going.
Beginners?
What does a reasonably intelligent individual need to invest profitably in today's stock market? Where to begin? A beginner may be someone caught up in the toils of life, too busy earning a living to make any money, unable to find a little risk-capital to invest. Time is the culprit, too little to do so much - to learn the language of the market, to understand market forces that cause prices to change.
Beginners may also be someone told that “buy & hold” is the only way to invest, but who is dissatisfied with the 5 to 15% return each year and who wants to diversify a little on their own.
Other beginners include seasoned veterans who recognize the changes that have taken place in the market with the baby-boomer investors and the increased influence of the internet. And the classic beginner is the student, serious about what the future offers and how to increase the likelihood of a reasonable piece of the pie.
As potential investors, we are faced with monumental questions: what should we invest in, how much, when and guided by what strategies. As with any effort, knowledge is the key to success. Understanding the risks as we learn how to invest becomes paramount in our quest for a profitable experience. In this manner, we can find the strategy that will let us sleep “when the wind blows.”
There are many educational resources for this purpose, helping the novice and/or seasoned investor focus on what is meaningful. Above-average returns with minimized risk can follow diligent training if we stay clear of high-risk ideas and juicy promises. Rather, find and learn the tools necessary to wheel around the investor's work-place, understanding relevant issues. Don't look for quick schemes to open the money windows in the sky. Understand how the market works, the inherent risks and those self-imposed, that can be minimized by careful and decisive action on our part.
Your own reasonable intelligence is sufficient to understand these principles. Understanding, you can make profitable choices on your own. Many different investing/trading strategies are available to meet these objectives. While there are success-stories in every strategy, the consistent theme with all successes lie in the discipline traders devote to their own version of the game. That means it is important for each investor to find the one strategy that fits their own personality. It is a rare case for anyone to become truly successful by riding in on someone else's coat tails.
Market success comes not from finding the silver bullet, the perfect system, the Holy Grail of investing. Rather, we each bring our own risk tolerance, expectations, intuition, training and a host of other issues to the table. All these, taken together, make us each very unique and different. What works for one will not work for all. As we struggle to find the system that works best for us, we need to experience different alternatives. That is, gain experience in the good, the bad, and the ugly of as many choices as possible. In this quest for understanding, several strategies, trading styles, and investment methodologies must be considered. This way the prospective investor can get a glimpse of their role in formulating a success-strategy that belongs to them. The difference between success and failure in the market is razor thin. That balance is tipped predominantly to those who learn as much about themselves as the market.
Whatever approach we take for our beginning education, a simple procedure call “Paper Trading” should be used liberally. This can provide a vicarious experience in the strategy being studied, without the expense and potential loss with real money. Since success lies not in making perfect decisions every time, paper trading can help us learn to make more good choices than bad. When we do take the leap and invest real money, we will have had some experience in the challenge and excitement the market can offer.
About the Author
Bob is the co-founder of Pro-fundity, an Internet forum for beginning investor improvement, helping investors think and do for themselves. The difference between success and failure in the market is razor thin. That balance is tipped predominantly to those that learn as much about themselves as the market. Pro-fundity helps that happen!