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There are few jobs in the world that don't require training, yet many people believe that stock market trading should require little to no training. Trading on the stock market gives you an unlimited potential for earning money, but all too often, people lose thousands and sometimes hundreds of thousands of dollars simply because they didn't have the knowledge to make effective investments. Instead of just taking a chance, why not learn how to trade the right way? Allow stock market professionals to teach you the strategies that will work for you.
Tips on Building a Successful Stock PortfolioGoing through the financial maze of stocks, bonds and mutual funds by yourself can be quite a challenge. Here are a few tips to help you get the know how on building a profitable investment portfolio.
- Know your goals. Consider how much money you'll need for your children's education or your retirement. Whatever your vision for the future might be, set your goals and develop a concrete plan for meeting them.
- Define your investment time horizon. If you're not planning on retiring anytime soon, you might want to have a portfolio that includes more long-term investments. If retirement is just around the corner, consider a more conservative approach.
- Determine your risk tolerance. Figure out your risk comfort level and compare that with what you can afford. In general, the longer you have to invest, the bigger risk you can take.
- Consult a professional. In order to avoid financial pitfalls later on, it is often wise to seek professional guidance when putting together a portfolio.
A certified financial planner recently said, "Research shows that investors continue to grapple with some of the most basic investment concepts, suggesting a greater need for financial advice and guidance."
To help investors meet their financial goals, we've worked to design help for investors to build and maintain diversified investment portfolios.
Combining educational tools, advice, market insight and investment products, we help investors develop a personal investment strategy, whether they are new to investing, seeking guidance but still want control over their investment mix, need help positioning their portfolios with a long-term perspective or need help understanding how the markets work.
Whether theyíre working in the business world or stay-at-home mothers, many people today are drawn to the risky allure of investments, which can mean either huge rewards or painful losses. While itís impossible to predict the fluctuations of the market with 100% accuracy, as you build your portfolio, you will learn to accept the losses and keep in mind the successes always waiting around the corner.
No one can control the market, but you can control what you invest in. Research products and know the businesses youíre putting your trust - and, more importantly, your dollars - in. One of the most common errors new investors make is jumping to invest in a hot stock from the previous year. Itís a common pattern for a market high to descend to a market low - right at the time youíre investing. This is not always the case, but it pays to invest in a strong stock rather than a fad thatís in one year and out the next.
Itís also important to know why youíre investing in that particular stock. For instance, if you invest strictly to gain some momentum, when prices fall youíll know to drop out; otherwise, youíll sit there wondering whether to wait it out or cut your losses.
Ironically, while itís impossible to predict the market, investments are all about timing. Two of the most important decisions investors make are when to take profits and when to cut losses. When the market is up, some say itís best to run a profit - a risky choice that could mean a huge loss or an enormous reward. However, many prefer to take their money while the market is rising, in case a fall is on the way. When the market is down, nearly everyone agrees itís best to close out before it gets worse to avoid losing any more money, cutting your losses.
Most importantly, only invest what you can afford, and have a good reason for investing. Losses are a real part of investment, which means you canít afford too many rash decisions, especially when youíre starting out. Donít let the market determine your bank account unless youíre using it to your advantage, whatever that may be.
The smartest thing a new investor can do is study the market. Before investing in a product, look at its record. Donít jump into any investments - think them over first. Some good sources of information about investments include The Wall Street Journal Guide to Understanding Money and Investing (3rd Edition) by Kenneth M. Morris and Alan M. Siegel, The Real Life Investing Guide by Kenan Pollack and Eric Heighberger, and The Only Investment Guide Youíll Ever Need by Andrew Tobias.
If you stay well-informed and make careful decisions, the market can be an exciting tool. In the business world, anything can happen, and with the market highs come enormous rewards that are well worth the risks.