Lux Investing

I would like to invest in shares.I am a beginner. what are the key points that i should before investing?

Abt the type of shares like banking sector or comm sector and the companies highly reliable and doing well.

Public Comments

1. Don't buy your whole position at once. Buy stocks in sectors that you have conviction will be strong in ensuing quarters--the trend is your friend... Spend at least one hour each week researching each stock you have bought---news, look at the reports, etc. I personally believe in using fundamental and technical analysis when investing in individual stocks. Make sure you are diversified in your portfolio in more than just one or two sectors. I recommend a minimum of four or five or its just gambling. One more brief note---tech stocks usually start rallying in August for most of the last 15-17 yrs--almost all of those years.
2. Don't be a sucker Don't get sucked in by the sales pitches of the so called brokerage community the best way to make money in stocks I have found is through intermediate term investing before you start learn some market history see how stocks move don't buy bank stocks when interest rates are going to be rising Check out Jim Grant's interest rate observer
3. You need to understand what you are buying, otherwise it is just crapshoot (e.g., gambling). Know how to read and UNDERSTAND the financial statements so that you can exclude the "weak". A company could be considered financially solvent when its current ratio (e.g., current assets/current liabilities) is greater than one. Is the company adequately capitalized? You can look at its debt/equity (e.g., the latter is stockholders' equity) ratio. Everyone has their own threshold, but I prefer it to be less than 50%. These are some of the analytical tools that you ought to be using when evaluating companies. Invest in the industries that you know and understand. If you have the "pulse" of what is going on in a particular industry, then this can help you determine whether or not it is a good time to buy (or sell) and which of the companies are strong and well run. Warren Buffet, probably America''s most successful investor, confesses that he doesn't understand the high tech business so he avoids investing this industry. That has not stopped him from making money. Investing is for the long-term. Forget about getting rich quick. If you try to do so, you are more likely to lose money. Everyone has heard the saying, "Buy low and sell high", but many people don't do that. You should be patient and buy shares in companies whose stock prices are in the low range in the past year(s). An investment approach that follows the "Buy low and sell high" philosophy is value investing. One criteria to narrow down your investment choices is to apply the price/earnings (P/E) ratio. The lower the ratio, the cheaper is the stock. After narrowing down the list of companies, then consider the expectation of a company's future (next year(s) earnings relative to the prior twelve months). If it is epected to be better, then the P/E ratio is actually lower and this company could be considered to be a buy. Don't sell when the market goes bad. Many people panic and sell. Instead, it is a buying opportunity. Have a list of companies on your "to buy" list and buy when the prices are right AND the fundamentals of the companies' businesses remains strong. [You mentioned your interest in financial stocks but their earnings can continue to sink in this market and it is possible that some of them may have to cut dividends to conserve capital. Accordingly, it may be best to wait a bit longer before buying in the financial sector because their business fundamentals are not strong.] Another thing, if you invest in a company that has strong and sustainable cash flow to support a high dividend rate (at least 2.5%), then that can help your investment return in the long term. By taking this approach, you are probably not to make a killing in any of the stocks (e.g., hit any grand slams), but you will get lots of singles, doubles and triples that will give you a healthy batting average (e.g., a good return).
4. There are many ways to make money in the stock market. Generally, bear these advice in mind: 1) The trend is your friend. Don't try to go against the trend. 2) Cut your losses and let your profits run. 3) For beginners, try to invest for a medium to long term period. 4) Buy strong stocks in strong sectors. Here are some free online resources for doing research on stocks: For industry information, go to http://biz.yahoo.com/ic/ For stock charts, check out http://www.prophet.net/ The most important factor in investment is to know yourself well first. Be willing to spend time and money learning how to invest(attend courses/read lots of books). Then develop a investment strategy that fits your personality. For instance, if you love action, a long term trend following system is probably not for you. iAtom http://how-to-invest-in-stocks.blogspot.com
5. DON'T!!! Get out. And stay out. Complete Report: Office of the Comptroller of Currency: 3Q 2007: http://www.occ.treas.gov/ftp/release/2007-137a.pdf Democracy requires an informed electorate. If you agree, please copy and paste this to whomever you wish. And by all means warn your friends and family. What's really going on: http://bp2.blogger.com/_H2DePAZe2gA/R9sT8yG-HKI/AAAAAAAAA7k/A-lM2Kotng/s1600-h/OCCpg1.png or http://tinyurl.com/2p5qyk That's right: $91 Trillion in derivatives, financed by 1 1/4 trillion dollars of investor assets. That's almost double the total global GDP (approx. $48 Trillion) for JP Morgan alone. Funny money. IOU's. Another $34 Trillion for CitiBank and $32 Trillion for Bank of America, each with $1 1/4 Trillion backing their bets. Original Source: http://www.occ.treas.gov/ftp/release/2007-137a.pdf And how they got away with it: http://biz.yahoo.com/ap/080328/derivatives_association_lobbying.html?.v=1 or http://tinyurl.com/3b8vjn As Paul Harvery would say, "And now for the rest of the story." These are very interesting looking numbers. And very revealing. While it's true that existing single family home sales were up 2.8% month to month-- they were down 22.9% year to year. How does that old saw go? Figures don't lie; but liars figure? Existing Home Sales: Feb 08 (preliminary): Single Family Only for Printing (click on the PDF Adobe icon): http://www.realtor.org/Research.nsf/files/singlefamilyreport.pdf/ Things are going to get worse, too: U.S. Economic Outlook 2008: http://tinyurl.com/pehzp or http://www.realtor.org/Research.nsf/files/CurrentForecast.pdf/FILE/CurrentForecast.pdf And commercial real estate looks like it's starting to go downhill too: Commercial Real Estate: http://tinyurl.com/yw9hf5 or http://www.globalindices.standardandpoors.com/data/pdf/spgra_values_031237.xls Warehouse and Desert Mountain West have already headed south.
6. Well, you can study and learn all about the market and how it works, and that will not give you anything but more knowledge. In my opinion, the only relatively safe way to accumulate wealth is to take a long-term investment approach and utilize dollar cost averaging and dividend reinvestment. The best way to do this is through a retirement plan or a DRIP PLan. Retirement Plans are a good idea no matter who you are. DRIPs seldom recommended by brokers due to the low rate of commissions received. However, these reinvestment plans can be very powerful long-term investments. Studies have shown that DRIP's are one of the best strategies on Wall Street. They are inexpensive and easy to start. New investors to the stock market should definitely consider a DRIP Plan. Companies like Toyota, Royal Canadian Bank, Sony, Bank of America, General Electric and many other Blue Chip Stocks can be purchased through your DRIP Plan, with as little as 1 share in most cases. These long-term plans are great for beginners as well as veterans. Check them out. Best of Luck
7. Diversity.