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Stock Market - Basic Principles - Part 2
Sunday, 20 December 2009 08:15 | Written by Zigfred Diaz
This the second part of the series on the discussion of principles of investment in the stock market. This is the continuation of a four part series. We previously discussed the first principle. This involves realizing that the stock market is just another investment vehicle. You must realize that there are other vehicles of investments before you decide to invest in the stock market. In this article the next two principles will be discussed. Please visit my blog if you want to view the entire article.
This the second part of the series on the discussion of principles of investment in the stock market. This is the continuation of a four part series. We previously discussed the first principle. This involves realizing that the stock market is just another investment vehicle. You must realize that there are other vehicles of investments before you decide to invest in the stock market. In this article the next two principles will be discussed. Please visit my blog if you want to view the entire article.
2.) You must know that investing in the stock market is a roller coaster ride - One of the advantages of the stock market is that there are times when it really climbs up then really big profits are made. However when it really goes down then really big losses are also made.
Bearing in mind that the stock market is a roller coaster ride it is generally best to sell when the market goes up and buy when the market goes down. When I started investing in the stock market about 2 years ago, the Philippine Stock exchange index was about 2000 + points. It went up to 2500 points and then down to the 2000 level in the middle of 2006. Slowly and steadily it climbed up to the 3200 level during the 1st quarter of 2007. It then went down in a very short period of time during the final days of the 1st quarter of 2007. It steadily climbed to a high of 3700+ points in July 2007 but went down below 3000 points a month after. It rose steadily to its highest at 3800+ points by October 2007, but after a month dropped to 3600 points.
There is only one conclusion that can be drawn here, that is it is really a roller coaster ride. Huge Profits and losses are made during those times that the market is up or down.
3.) Know what type of investor you want to become - There are two types of stock market investors, long term investors and short term investors. This is a very vital question that each serious new investor should ask himself. This will ultimately affect whether you should buy or sell a certain stock.
Take note that If you are a long term investor, this means means that you hold your stocks from 5 to 10 years or more. This actually means that you believe in the company that you are investing in. Since you are putting in your money for a long period of time, you must be certain that such money you put in is considered already as extra.
The advantages of long term investing is that they do not have to worry about the cumbersome day to day technical analysis that has to be monitored. There is no problem if the stock is held for a long period of time because long term investors believe in the fundamentals of the company. On the other hand a short term investor cashes in within a months time to 6 months time. If you are a short term investor, one thing that has to be considered is the monitoring of the day to day activities of the market.
Short term investors have also to consider if they can afford to put in their money for a long period of time however the time element is not as long as that of the long term investor. This is so because during the short period wherein you buy and sell stocks, you might incur losses during this time so you may decide to wait longer a little bit more.
When I first invested in the stock market I said to by myself that I will be more of a long term investor. There are stock that I invest in that I consider as short term. However most of the stocks I hold are considered as medium and long term investments.
by ZigfredDiaz
This the second part of the series on the discussion of principles of investment in the stock market. This is the continuation of a four part series. We previously discussed the first principle. This involves realizing that the stock market is just another investment vehicle. You must realize that there are other vehicles of investments before you decide to invest in the stock market. In this article the next two principles will be discussed. Please visit my blog if you want to view the entire article.
2.) You must know that investing in the stock market is a roller coaster ride - One of the advantages of the stock market is that there are times when it really climbs up then really big profits are made. However when it really goes down then really big losses are also made.
Bearing in mind that the stock market is a roller coaster ride it is generally best to sell when the market goes up and buy when the market goes down. When I started investing in the stock market about 2 years ago, the Philippine Stock exchange index was about 2000 + points. It went up to 2500 points and then down to the 2000 level in the middle of 2006. Slowly and steadily it climbed up to the 3200 level during the 1st quarter of 2007. It then went down in a very short period of time during the final days of the 1st quarter of 2007. It steadily climbed to a high of 3700+ points in July 2007 but went down below 3000 points a month after. It rose steadily to its highest at 3800+ points by October 2007, but after a month dropped to 3600 points.
There is only one conclusion that can be drawn here, that is it is really a roller coaster ride. Huge Profits and losses are made during those times that the market is up or down.
3.) Know what type of investor you want to become - There are two types of stock market investors, long term investors and short term investors. This is a very vital question that each serious new investor should ask himself. This will ultimately affect whether you should buy or sell a certain stock.
Take note that If you are a long term investor, this means means that you hold your stocks from 5 to 10 years or more. This actually means that you believe in the company that you are investing in. Since you are putting in your money for a long period of time, you must be certain that such money you put in is considered already as extra.
The advantages of long term investing is that they do not have to worry about the cumbersome day to day technical analysis that has to be monitored. There is no problem if the stock is held for a long period of time because long term investors believe in the fundamentals of the company. On the other hand a short term investor cashes in within a months time to 6 months time. If you are a short term investor, one thing that has to be considered is the monitoring of the day to day activities of the market.
Short term investors have also to consider if they can afford to put in their money for a long period of time however the time element is not as long as that of the long term investor. This is so because during the short period wherein you buy and sell stocks, you might incur losses during this time so you may decide to wait longer a little bit more.
When I first invested in the stock market I said to by myself that I will be more of a long term investor. There are stock that I invest in that I consider as short term. However most of the stocks I hold are considered as medium and long term investments.
About the Author:
Would you want to know more about investment strategies ? Visit the blog of Zigfred Diaz where he writes about several interesting topics such as investments, financial management, business, making financial online and Stock market investing