How not to Lose Money when Investing | Make Money Investing

Posted on March 2, 2010, 9:30 am, by admin, under Stock Market Investing.

How not to Lose Money when Investing | Make Money Investing

The following content is a list of 9 suggestions to consider if you are a novice investor and are trying to select the right investment vehicle so that instead of losing money, you actually make money investing in the stock market.

Step #1: Educate yourself and do plenty of research – study, study, and then study some more. You cannot put a price on knowledge, especially where investing money in anything is concerned. Consider reading and reviewing the following about the corporation you are contemplating investing in:

annual and quarterly reports of the particular corporation
magazines that focus on personal finance
proxy statements of the particular corporation
registration prospectuses and statements of the particular corporation

Step #2: Develop your goals and decide on a strategy that will help you achieve your goals – it is always advisable that you seek out the advice of a licensed professional

Step #3: Diversify your investments – in other words, never put all of your eggs into one basket (meaning never put all your money in one stock or other investment)

Step #4: Look for the most significant tax breaks – 401(k) plans and IRA’s are a good choice where this is concerned as well as Keogh plans should you be self-employed

Step #5: Find and purchase those stocks that you can hang on to for between 3 to 5 years – even if these are considered a “good” investment, unrealistically high prices make these a bad purchase

Step #6: Invest in those financial instruments that you are familiar with – this emphasizes the value of educating oneself and doing some serious research so that you avoid investing in a company or industry sector that you are not familiar with

Step #7: Value comparison is critical – learn how to calculate and determine certain critical financial figures (e.g. price over earnings ratios and the such) when you are comparing one investment with others

Step #8: Resist the temptation to invest in fads and “too-good-to-be-true” types of investments – just because everybody is investing in annuities or gold (for example) does not mean that you should follow the pack, considering how that pack will change direction without notice and focus on some other investments unpredictably

Step #9: Knowing when to “fold your hand” – remember to consider holding your investment (mutual funds or stocks especially) for a period of 3 to 5 years, unless it begins to plummet in value, in which case you should just cut your losses and sell out.