Investing Stock Requires Research And Discipline

2007-03-08 10:33:40

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You have many choices when you're considering where to invest your hard-earned money. For many people, the stock market is an attractive option. You will have to spend some time learning how to invest in the stock market but it will be time well spent.

When thinking of investing stocks, you should try to choose carefully the stock to invest in. This means you should know the business inside and out; if you don't, you'd better forget about investing stocks. Remember, when you're investing stock you're buying into a company.

This also implies you should develop an understanding of accounting, which is the language of business, so you can make your own judgments of the financial condition of a company. If you're putting your money at risk, you should know the value of what you're buying. More important, investing is fraught with gray areas so you shouldn't just accept someone else's judgment about a company's investment potential.

Solid research also gives you an idea of the value of the company and its ability to protect its profits from competitors. With these assessments, you can develop an idea of the price at which you will buy. You will want to put in a margin of safety when investing stock, to allow for errors in your estimate.

It's easy to be too optimistic in estimating a stock's value. You can compensate by buying stocks only when they're trading for substantially less than your estimate. For shakier firms, your safety margin should be higher.

You may find difficulty following the valuation discipline, fearing that if you don't buy today you lose forever the chance to buy the stock. That is possible; but it's also possible the share will tumble. It's much less painful to think about not making money by investing stock than about losing money you already have.


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