Business & Finance Investing & Financial Markets

Stock Market Investing Guide - Taking the Long-Term Approach

Stock market investing is not rocket science, as some insiders would want you to believe. Many times, stocks are mispriced, which offer you a great opportunity to invest your capital in them. When you take a long term approach, you need to think of stock market investing as your own business. It is something that you need to grow and nurture over a period of time for it to provide a lifetime of returns.

Here is your stock market investing guide for long term gain. First of all, find a business that has a product or service that you can relate to. Ensure that the company has a powerful and viable strategy to have a competitive edge in the market. Go for a company whose CEO is one who can take the company to the next level on a periodic basis.

Secondly, arrive at a proper estimate of what the fair market value price for the stock really is. Add a 50% margin of safety to that value. You should plan to buy your stocks when they are available at a discount price to the stock's fair market value.

Next, watch the company or the list of companies on your radar over a period of time. Check daily on the stock market price for the stocks that you are interested in. Wait patiently for the most opportune time to strike. As you wait, read the news and the company reports to keep yourself updated on the industry.

When it is time to buy, allocate about a fourth of your total capital to invest in your initial purchase. Let it not go below $2500 as you would end up paying more than 1% of your capital towards commissions. Since you are in it for the long run, begin to acquaint yourself with the financial health of the company. Attend calls with the company's CEO through quarterly teleconferences. Go through the SEC filings on a quarterly and annual basis. Keep up-to-date regarding any news about the company.

When the price of the stocks drop, begin to commit more capital into the business. As long as you have chosen a rock solid company, dropping prices merely indicate that the stocks are temporarily mispriced. This might tempt a lot of people to dump their stocks. However, you should make maximum use of this opportunity to buy stocks. And again, you should sell under certain circumstances when the prices are shooting up. The right time to sell is when the price of the stock in the market is above 20% of your estimated fair market price. Buying low and selling high is the best way to make long term profits.

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