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Investing in a Stock When I search online for investment tips what I usually find are terms and definitions or links to online brokerage services. Really worthless stuff if you ask me. I decided to post tips I think will be useful to individual investors who would like to manage their own portfolio. But if your looking for a perfect guide look else where because what I’m going to tell you is what to study before investing. You still have to do the homework yourself. 1. Know the nature of stock investing. Investing is buying a stock of a company. Buying a stock means you have a share of the ownership of that particular company. What do owners get from owning a business? Profit. A shareholder gets his/her share of the profit through dividends being paid out to every shareholder of a company. So unless you are receiving a reasonable share of the profit, you are not an investor. Many companies do not pay any dividends but personally, I would never buy a stock that doesn’t pay dividends. 2. Don’t trade stocks What I mean is that don’t buy and sell too frequently because of the short term fluctuations in its price. The transaction cost usually cuts too much into the profit for an individual investor. 3. Price a stock based on its value, don’t value it based on its price Don’t buy stocks because it’s expensive. Expensive doesn’t always mean that it’s valuable. Sometimes, price goes up because lot of people are buying it. Don’t buy it just because it’s cheap either. Company could be on the verge of bankruptcy or maybe the stock is just really not worth anymore. What you should be doing instead is looking at the value of the stock. In order to do this you would have to compare a companies performance year in and year out to other companies in the same industry. Study annual reports and SEC filings. You can even interview people that works in the company. 4. Study economics This is probably the most neglected area in investing. A company (lot of companies are multinational now days) is still within the larger framework economy that is affected by political, natural, and social changes. Stock market is historically affected by the economic cycle called business cycles. Even a well performing company is subject to market crashes. Certain industries are subject to weather and others are subject to political regulations. Also, political affairs have a large influence over economy and thus the stock market. Things like inflation, currency crisis, sovereign debt crisis can wipe out your portfolio. What I recommend as far as studying economics is the Austrian School of Economics. You should definitely read:Ludwig von MisesFriedrich HayekMurray Rothbarb You can also get sound analyses of the current global economic conditions from people like:Peter SchiffThomas WoodsJim RogersMarc Faber For more visit, channelnkt.com Tags: Investing, Stock View this post on my blog: http://stocktips.valuegov.com/investing-in-a-stock/