Friday, March 20, 2009

Buying Stocks For Beginners - Back To Basics

The beginner stock market investor could be forgiven for thinking that the end of the world is nigh. With share prices having fallen dramatically the world over and the economies of most developed nations entering or already in recession things certainly do look grim. That's why I thought it was time to put together another "how to buy stocks for beginners" type of post.

So lets get back to basics. When you purchase shares in a publicly traded company, what does it mean? Well the first point I'd make is that your investment is more than just a number next to a stock symbol on the Yahoo Finance website (or whatever financial website you prefer). Your investment represents ownership of a portion of a real business. That ownership entitles you to a share of that business's future profits.

This is a very important concept to grasp. Don't be taken in by the daily fluctuations of share prices. These prices are driven by investor sentiment, by a bunch of people trying to guess what the future may hold. The rate at which these prices change belies the stability of the underlying value of your investment. The value of the business - your business - doesn't change that quickly. Sure there are times when a company makes an announcement about a fundamental change in their operations which may cause the price to plummet. But more often than not, it's just the general mood of investors pushing prices up and down.

Don't get me wrong - I'm not suggesting that we can ignore the current economic problems. But by the same token, don't let the current gloom and doom terrify you to the extent that you're willing to ignore quality companies trading at bargain basement prices just because you don't know if the stock market has bottomed yet.

That brings me nicely to my next point. I'm a firm believer in buying stock for the long term. One of the advantages of this approach is that it frees up your mind from worrying about the day to day gyrations of the stock market. By fixing your eyes firmly on a point 3 to 5 years (or even longer) down the track, you can afford not to worry about what your shares will be selling at next week or next month. You'll be able to focus on what really matters - watching the business, making sure it continues to perform as you expected when you bought it.

However, in order to do this you'll first have to put some effort into learning how to understand stock market concepts. Learn how to read a company's financial statements. Compare profitability ratios with those of it's competitors. Consider the financial strength of the company - does it have excessive debt and will it be able to make the interest payments on that debt?

There are a number of very good books available on investing in the stock market. I wrote a post some time ago about what I thought were some of the best investment books for beginners. The books mentioned in that post are all very good and well worth readying.

When To Buy Stocks

This is the essence of being a long term investor and is what I was alluding to before. If you're willing to take a long term view, you can afford to think more about the best stocks to buy rather than the best time to buy stocks. Accept that you wont pick the bottom. There's every chance that prices may go lower. However, if you're happy that you've bought stock in a good quality business who's earnings are going to grow over the long term, you'll be able to ignore the short term price movements. If it's any consolation, you probably wont pick the top either.

I think if you can remove this focus on short term results, you will remove one of the biggest impediments to beginners buying stock.

71 comments:

Anonymous said...

Hi would you be interested in a link exchange for a similar site?

You can get in touch with me at ianlikestogamble (at) googlemail.com

Anonymous said...

hello... hapi blogging... have a nice day! just visiting here....

kaspo said...

good content, for more information about investing

Dhaka Stock Exchange said...

Thanks for sharing this helpful information!
I've found lots of gr8 info from your blog!

Jaxon said...

Beginners who make investments in stock and share market must implement the ideas suggested by a financial adviser. Since, it is difficult to predict the future status of stock market, it is always best to stick to low risk funds.

Unknown said...

Hey Great post.ipo process

day trading books said...

I am glad to be a part of your post. Thanks for sharing this useful content.

Marvin G said...

http://stockmarketplan.com/
Nice complete post sir. I just started blogging on the markets myself. Emphasizing more on the overall direction of the stock markets.

madywatson said...

The Stock Market can seem intimidating for beginners. Most of the basic concepts are actually not complicated.
The stock market can seem like a dangerous place to venture into, but investing in the stock market doesn't need to be scary. Stock market will fluctuate.

day trading books

penny stock picks said...

Its a useful blog for the beginners like me n stock market to succeed and earn money. The guidelines mentioned here are very relevant.

investing in stocks said...

I want to invest in stock but my mother warned me of gambling. Is investing really just another form of gambling, please suggest me.

Invest said...

Stock market investing isn't some gambling as many may think. It is a common mistake.

But speculating may be close to that...

penny stocks said...

Penny stock alerts are ideal for those who want to invest their money in penny share. Several companies will mail you a hard copy monthly of a record of the top 10 stocks to you for your investments.

seo companies said...

I was wondering how I could use SEO and possibly a website that could bring me more jobs. I have been advertising in yellow pages and phonebook but I am starting to slow down. I have a local plumbing business as well as my partners in heating & air, and many contracting services.

Stock Tips said...

I certainly enjoyed the way you explore your experience and knowledge of the subject! Keep up on it. Thanks for sharing the info
Thanks
Regards
Stock Tips

aditi vyas said...

You have shared your experiences in good way but you can know more here

addypotter said...

Great blog! I just signed up for an online investing course and before I start I wanted to do my own research. I stumbled on your blog and found the information super helpful! Keep the great info coming.

Nishi said...

This is the perfect blog for anyone who wants to know about this topic. The article is nice and its pleasant to read. I have known very important things over here. I admire the valuable advice you make available in your expertly written content.
share market tips

Nishi said...

Awesome blog for traders and investors.
thanks
Regards
share market tips

stock tips said...

Copper edged up on Monday as its demand outlook improved on hopes Europe and the United States will announce fresh measures to shore up their faltering economies, while investors also eyed factory data from top metals consumer China for trading cues.

Stock Tips
Commodity Tips

stock tips said...

It was a awe-informative post and it has a significant meaning and thanks for sharing the information.Would love to read your next post too......
Thanks
Regards
Stock Tips
Commodity Tips

stock tips said...

Oil prices were mixed in Asian trade today as investors await further measures by policymakers to boost the ailing Euro zone and US economy, analysts said. New York’s main contract, light sweet crude for September delivery eased 13 cents to $90.00 a barrel while Brent North Sea crude..

Stock Tips
Commodity Tips

PENNY STOCK INVESTMENTS said...

Excellent blog some interesting stock suggestions.

QUALITY STOCKS UNDER FIVE DOLLARS said...

This blog contains some excellent advice for investors just starting out.

Anonymous said...

Cool website buddy I am gona suggest this to all my list of contacts.
gold ira investing

Buy best penny stocks said...

Hi,You explained the topic very well.The contents has provided meaningful information thanks for sharing info.

stock market tips said...

There is lot of articles on the web about this. But I like yours more, although i found one that’s more descriptive.

Share market tips said...

I think the things you covered through the post are quiet impressive, good job and great efforts. I found it very interesting and enjoyed reading all of it...keep it up, lovely job..

Share market tips said...

Your post is really good providing good information.. I liked it and enjoyed reading it. Keep sharing such important posts.

Why penny stocks to buy said...

I really like to read.Hope to learn a lot and have a nice experience here! my best regards guys!

Naresh Jain said...

To get Super quality mcx tips in indian market visit our website
Commodity tips And Financial Astrology

Naresh Jain said...

To get Super quality mcx tips in indian market visit our website
mcx tips And Financial Astrology

Investing stocks said...

Really i appreciate the effort you made to share the knowledge.The topic here i found was really effective to the topic which i was researching for a long time

Stock Tips said...

This is the first time i am reading your post and admire that you posted article which gives users lot of information regarding particular topic thnaks for this share.

Stock Tips said...

The post is written in very a good manner and it entails many useful information for me. I appreciated what you have done here. I am always searching for informative information like this. Thanks for sharing with us.

Share tips said...

This blog is very informative
share tips

Financial Astrology


Stock tips

Commoditytips

Stock Future Tips said...

First of all, I would like to thank you for the great and informative entry. I have to admit that I have never heard about this information I have noticed many new facts for me. Thanks a lot for sharing this useful and attractive information and I will be waiting for other interesting posts from you in the nearest future. Keep it up.

Nifty Future Tips said...

Great market updates are here which is really helpful for inital traders in any way, like to get information with the graphs or other thing also.

Forex Market India Tips said...

good information share this blog for markets

Equity Tips Stock Cash Calls said...

Private sector lender Karur Vysya Bank reported dismal
performance during the first quarter (April-June) as the net profit fell
17.5 percent year-on-year to Rs 120.3 crore on sharp jump in
provisions despite strong income from its treasury operations.
However, net interest income (NII) grew by 30.3 percent.
Intraday tips

Unknown said...

Today indian share market is so fluctuating that it is very hard to work & earn money but some companies giving really very good calls so that we can earn in this Share market. PowerofTrading.com is one of them. They are giving regular 5-7 calls with more than 98% accuracy. Go for Free Share Market Tips

Regards
POWEROFTRADING TEAM

You can go for Bux Website to start earning money visit Ninja Bux -
Earn Money through Bux Website

You can use the full Guide which guide you all - Neobux Guide

Sumit Malik said...

Stock market investing isn't some gambling as many may think. It is a common mistake.

But speculating may be close to that...
Share Market Tips

Simran Shah said...

PRECIOUS METAL WRAP: Gold traded near the highest level in more than four months as investors weighed the crisis in Ukraine against signs that the rally was overdone and physical buying in China slowed.
commodity Tips

Rahul Solanki said...

Trifid Research is an Indian share market advisory firm based in Indore, India. He has proven month after month that buying and selling and investing in the equity market can be profitable, whether market overall is bearish or bullish. Trifid Research facilitates its customer in their wealth creation procedure. It provides recommendations for Equity- Cash and F&O traded on the National Stock Exchange. It is a group of professionals with expertise in technical and fundamental analysis.

Stock Tips

Rahul Solanki said...


Trifid Research is an Indian share market advisory firm based in Indore, India. He has proven month after month that buying and selling and investing in the equity market can be profitable, whether market overall is bearish or bullish. Trifid Research facilitates its customer in their wealth creation procedure. It provides recommendations for Equity- Cash and F&O traded on the National Stock Exchange. It is a group of professionals with expertise in technical and fundamental analysis.

VALUE STOCKS BELOW 5 DOLLARS said...

Great Stock Investing Newsletter specializes in Value stocks below 5 dollars. Select stocks with enormous potential

Unknown said...

Thanks For your posting... Really Impressive

Regards
Stock Tips

Unknown said...

For beginners, it is complicated sometimes. It is important to understand the terms like nifty future live chart or many more.

stock tips said...

This is really good blog for those who want to learn and invest in stock market I found your blog on Google and found it very interesting i will bookmark this blog for my sharing with others.thanks

capitalheight said...

This is the perfect blog for anyone who wants to know about this Stock Tips topic. It contains truly information. Your website is very useful. I admire the valuable advice you make available in your expertly written content. I want to thank you for this informative read; I really appreciate sharing this great.

Zoid Research said...

Such an informative blog post not for beginner but also for experienced traders and investors. Some points in this blog are really important and can be implement while trading on any segment,i like to read such valuable stock tips.

Keep it up

Pooja Pariya said...

It is a great post for every blog and for me. Obviously I want to say that this is very important post for learn. Thanks....
Sgx Nifty

Unknown said...

Your blog information is best keep it up...................
Stock Market Tips

Unknown said...

Keep it up. Keep blogging. This is a great inspiring article. Looking to reading your next post.
Get More Intraday tips on Mobile.

CapitalStars07 said...

The BSE benchmark climbed 173.93 points to settle the day a tad lower than the psychological level of 25,500. free intraday tips

intraday sure tips said...

Nice market tips its gives the future option market and cash tips to improve the share trading.

Intraday Sure Tips

Intraday Trend said...

Thanks for supporting your time to post such an interesting & useful content.Great piece of writing, I really liked the way you highlighted some really important and significant points. Thanks so much, I appreciate your work.
Accurate Stock Tips

Intraday Stock Cash Tips said...

Being a financial adviser i appreciate your blog the way you are presenting this blog really good and informative too thanks for sharing such a nice blog.

Nifty Futures Tips said...

The blog is very effective and useful for everyone, new traders can learn more new things from here.

Madhuri said...

The commodity derivative market in India has corroborator phenomenal increment .The main functioning of the futures market came under serutiny during 2008-2009 due to price rise and the contribution of futures market in stabilizing spot prices was highly discussed.
stock option tips provider

kumar said...

Great publish, very useful information. I really appreciate this post. You must continue your writing. I'm confident, you've a huge readers' base already.Thanks for sharing valuable post.
Engineering Colleges, ECE Engineering Colleges in Chennai

محمد الجندي said...

جايب لكم مواقع شركات صيانة الاجهزة المنزلية شركة يونيون اير , وشركة سامسونج و شركة سيمنس دا المواقع المعتمدة من الشركات , انا دورت كتير لحد لم توصلت للمواقع دي
صيانة توشيبا


صيانة غسالات سامسونج
صيانة ثلاجات كريازي
صيانة ثلاجات توشيبا

صيانة سامسونج
صيانة توشيبا
صيانة غسالات توشيبا
صيانة ثلاجات توشيبا

صيانة سخانات سيمنس
صيانة غسالات كريازي
رقم صيانة سيمنس
اسعار تكييف يونيون اير
مبيعات يونيون اير
تكييف يونيون اير

devidnayana said...



I am very happy when read this blog post because blog post written in good manner and write on
good topic. Thanks for sharing valuable information.

School Information Management System,
Online Fee Payment Integration
College Management System

Message

Unknown said...

Very nice and helpful information has been given in this article.

Nifty intraday tips
Profit Vista

CA Akash Garg said...

Thanks for sharing such blog. Trade in Stock future tips with best stock future tips provider.

bank nifty tips provider said...

Thanks for sharing such a good information Nifty future tips

abhishek said...

Thank you blogger for sharing such a beautiful blog. It is very informative to everyone. I have been reading your blogs from a long time. I hope you would like to read my blog where we give
stock cash

luckys said...

movies123

Car rental said...

Before we even get started we want to assure you of something: You have what it takes to be a great investor. You have already taken the leap and started researching the best way to invest for beginners and here you are - Read more here: Investing for Beginners

Best call center services said...

Thank you for sharing This knowledge. Excellently written article., if only all bloggers offered the same level of content as you, the internet would be a much better place. Please keep it up!
Web support system

sainik school entrance coaching in Bhiwani said...

I appreciate you giving this information. A very well-written article. , if only all blogs provided content of the same calibre as you,