| You've saved some money and you want to invest | | | | recommend you move from one stock to another, |
| it in the stock market. You'll first need to understand | | | | because they make big commissions when you do. |
| some stock market investing basics. | | | | Mutual Funds rarely beat the markets because of |
| 1) First and foremost the stock market is just a | | | | rules placed on them. The only one you can count on |
| vehicle for achieving your financial dreams. You can | | | | is you, so learn to become a great investor. |
| use it to create an income to live on (great for those | | | | 4) This now brings us to rule 4 of my stock market |
| with no job such as the unemployed and retired), or | | | | investing basics, how do you know when you are a |
| you can use it to grow your money for some future | | | | good investor? You use a benchmark, that's how. |
| expense such as your child's college, your dream | | | | The stock market offers many benchmarks but the |
| home, or even for your retirement. | | | | three most popular are "the Dow", "the NASDAQ", |
| 2) Whichever way you choose to invest you'll need a | | | | and the "S&P 500". These are indexes whose |
| basic understanding of how stock market investing | | | | prices are based upon the stocks they track. For |
| works. In the rawest sense, you are basically buying | | | | example, the S&P 500 tracks 500 stocks. If |
| an ownership interest in a company. If that company | | | | those 500 stocks go up on average, the S&P |
| does well so do you (and vice versa). When you buy | | | | 500 index goes up. |
| a share you become a shareholder and are entitled | | | | Your goal as an investor is to "beat the market". |
| to share in the profits (through dividends if the | | | | What that means is that your investing return should |
| company pays them) and attend shareholder | | | | be greater than the return of the major indexes. It is |
| meetings where you can vote on company matters | | | | in this way you can tell if you, are someone else, is a |
| and be heard. | | | | great investor. If someone says, "I made 50% this |
| However, I doubt you want to become an investor | | | | year." Don't believe he is a great investor. While it |
| in the stock market for those things. Most people | | | | may sound good, if the markets went up 80% that |
| invest because they want their money to grow for | | | | year, this guy did horrible and underperformed the |
| them and multiply. This certainly can be done and the | | | | market. |
| stock market offers many ways, which brings us to | | | | 5) Risk vs. Reward. Every investment offers risk, the |
| rule 3 of our stock market investing basics. | | | | more risk you take, the more return you should get. |
| 3) When it comes to investing, you can invest in | | | | How much risk do you want to take? Risk comes in |
| stock through a mutual fund, by yourself, or through | | | | many sizes. For example, a penny stock has a much |
| the aid of a broker. Of these ways I recommend | | | | greater chance of being worth 0 than a big company |
| you invest on your own. No one will take care of | | | | such as Microsoft or Wal-Mart. However, a penny |
| your money as well as you will. Brokers love to | | | | stock could easily rise 100%, 300%, or more. |