What Type Of Stock Should You Buy?

Not sure which stocks to buy? Here are a few tips for making selections that fit your investment mentality and outlook.

Investing in the stock market provides the opportunity to grow your savings into a sizable account over a period of time. But if your stocks tank, you could lose your entire investment. That's why it pays to do a little snooping before you plunk your money down on any particular stock or mutual fund.

Keep an eye on the stock market for several months before purchasing a particular stock. Find out which stocks are better performers than others. Some do better over time, while others display short bursts of volatility. Be wary of the latter so that you don't' become dazzled by the prospect of short-term wealth that may instead fizzle and leave you destitute.

Read stock reports, follow company financial news, and get a few books or audiotapes on investing. Learn a few basic investment strategies that will help you understand the market and appreciate the general trends behind stock market activity.

Get in the habit of doing paper trades several times a week. That is, instead of actually buying stock and watching it perform, work out the pattern on a piece of paper by pretending to buy a thousand shares of Nokia, for example, and tracking it for a couple of weeks to see how it performs. Only when you start making more money than you lose are you ready to invest real cash in the market.

In particular, follow the stocks you respect or enjoy. For example, if you like Starbucks products, check their stock to see how it does. If you feel it is a good investment, buy a few shares and see what happens. Investors tend to get more involved with stocks they personally use or endorse.

Look for stocks that are relatively stable. Some are classified as rolling stocks, meaning they tend to go up and down in a fairly predictable pattern. You may decide to buy when the stock goes low and sell when it goes high, thus making a profit. Practice these strategies on paper before investing actual money in them, especially if you are novice in the stock market.

You also may want to invest in well-established stocks, or those that have been around a long time and managed to become prosperous rather than going bankrupt. New stocks are sometimes touted as a hot deal or a fortune waiting to be made, but that kind of dealing rarely happens, especially for someone new to the market.

Plan to diversity your holdings. Rather than putting all your savings into one company, buy several shares of different companies. This strategy is called a mutual fund or a portfolio, and your stock broker can help you choose a reliable package. That way if one or two companies go under, there are still three or more to hold your account steady.

Ask your broker's advice about what to invest in. He or she should have a pretty good idea of the market conditions and can steer you toward good bargains. You could let the broker make all decisions and handle all transactions, or you may decide to do everything yourself. Perhaps the most effective beginning strategy is to work with your broker on a solid investment goal.

Buying stock in a company provides an exciting opportunity to build your savings through investment. Become familiar with the stock market, determine the best stocks, and watch your money go to work.

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