The stock market is a good way to make money. However, in order to make money, you have to know what you are doing. In short, you need to know how the stock market works. In-depth analysis of the stock market is covered in many finance and business classes.
The following is a simple guide on how to make money in the stock market:
1. Research, research, research - Investing in the stock market entails research work and analysis. You simply cannot pick a stock from the list and buy it without knowing anything abut the company you are investing in. If you do that, then be prepared to lose money.
So how are you going to avoid losing money? Before buying any stock, make sure that you investigate the company you are interested in. Once you have your finger in the pie, regularly visit company web sites for press releases and updates. You can also get information in Yahoo! Finance and Google Financer to get the latest news about your favorites stocks, and to monitor their performance. Make sure that you read the quarterly and annual financial results of the companies you invested in. Make it a habit to watch the news because it can help you guess whether your stock's prices will rise or fall.
2. Buy and sell wisely. If you already own a portfolio of stocks, you already have an idea of what stocks to buy and when to sell because that would have been included in your investing strategy. If you want to add to and diversify your portfolio, consider buying stock:
o From companies that are about to go public
o From undervalued companies
o From those with price-earning ratios significantly lower than those in their industry
o From companies with strong balance sheets
o From mutual fund companies who have made a killing in the market
As some investors say, in order to make money in the stock market, you need to avoid losing money. Thus, you should know when to sell. Do sell your shares of stock:
o When its price has dropped dramatically, but still a little above how much you paid for it
o If it remains stagnant for several months
o If the competing stock is showing stronger earnings
3. Hire a good broker. If you do not want to bother yourself with the daily aspects stock trading, then hire a full-service broker. All you have to do is give him the money and he will make your entire buy and sell decisions for you, effectively decreasing your role in the trading process. But it is imperative to find a broker that shares the investing values that you have and who you actually trust so you will be sure that your money is in good hands.
If you want a more hands-on approach to trading, then go with a discount broker. The discount broker will earn more money if you do, so he will make sure that you do not lose money. You will benefit from the experience and expertise that he will provide you when you are making your buy or sell decisions. You can also improve your chances of making a reasonable profit by taking some online courses in business or finance.