Stocks And Money Information

Online trading in stock markets has empowered many a retail investor and trader to play the game of stock markets. Literally anyone, from lay investors to professional day traders, can do online stock market trading.

But trading in stock market through the internet has many pitfalls and one could end up loosing money if he is not careful. While speed is the advantage of online stock trading it also brings with it inherent dangers as one can make investment and trading mistakes at an equally fast pace. Many first time traders wrongly assume that they can make a lot of money online even without any investment skills and knowledge. In bull market we hear so many such success stories of internet traders making millions overnight. Even before the advent of internet people were doing day trading through their brokers via telephone. Many used to sit at brokers office and trade from there. Experience has shows that for every 100 traders who make money in the stock market there are 100 and more who actually loose money.

Market has been in bull phase for past several years – from 2003 May to be precise and internet traders have made lot of money merely by following the buy and hold strategy. This strategy may not work in the inevitable bear phase of the market. A couple of wrong moves in the bear market can wipe out all the gains made in years of bull market. Investors need to be financially savvy when markets show bearish signals.

Every existing and would be online stock traders should understand that internet trading of stocks is fundamentally no different from calling up the broker and trading. Internet is merely a medium to facilitate stock trading. The internet has not altered the fundamentals of smart investing but has only made trading in stocks an easy affair. Any trader should  have a set of rules and guidelines like profit booking, applying stop loss, riding with the momentum, long term value investing etc. irrespective of whether he is executing the trade through the web or otherwise.

Many web sites of broking houses, financial institutes, mutual funds etc.  can help you do good research on the companies you plan to invest. Making informed decisions will save you from losses and help build wealth. Also one should avoid compulsive trading in stocks. This is of late a very common phenomenon as internet has made trading very easy. Before the advent of internet one had to telephone his broker or visit his office to execute a trade. But nowadays with laptop computer and wireless internet one can execute the trade himself even while holidaying in a cruise. For the long term, a buy-and-hold strategy – buying good companies and holding them for anything from 5 years upwards is the best way to invest even in online stock markets.

The stock market always presents an intimidating and confusing environment even for an expert investor and trader. For a beginner in the stock market it could be daunting task to invest or trade.  Many people form a kind of association to invest in the stock market. This is similar to a mutual fund the only difference being unlike mutual funds the group may not have large number of investors  and huge financial resources. The plus points are you avoid paying huge management and entry fees associated with Mutual Funds..

Many of these stock market investing clubs are close knit entities and getting an entry into existing associations may be difficult. So you may consider forming a stock market group yourself. There are various benefits to being part of stock market investment club. You can take advantage of combined stock market investment knowledge. Two head are better than one and when you work with an association of investors who have a similar interest in the stock market you’ll have a huge resource of knowledge and experience at your hand. Even those who are novices and beginners to the stock market will have very valuable ideas and information that can be very beneficial. With such a participative group approach to making decisions best stock market investing and trading choices can be made.

Many studies and past experiences have shown that when a group of people make investment choices after a series of discussions and debates, the profit potential is far higher. There is a significant risk reduction in stock market investing after such group interaction. Each individual’s fund contribution may be small even though the combined investment pool is large. If your group has say 100,000 dollar fund and there are twenty people with equal contribution you get a chance to learn how the stock market works and profit from it with a contribution of mere $5,000.

 With such an association of stock market investors you can make some great stock market investments but losses would be lot more palatable and manageable. Profits would of course be distributed among the club members on proportional basis. The resource pool of the group would be higher than an individual so the group has the ability to invest even in falling market. Many times even in a normal bear phase or crash in the stock market many individual investors have their investments or derivative positions wiped out as they are not able to meet the margin calls. In group investing huge personal losses are not likely. In worst cases some members who are more resourceful can pool in more funds to meet margin call requirement.

An individual with limited resources can have only a limited number of stocks in portfolio but as an association of investors can diversify stock market investments to a wide range of stocks and sectors. It has also been observed that those who invest in groups pool their profits and dividends back into the stock market which results in greater returns in the long run. Individual investors normally books profits faster and do not reinvest dividends.

Forming a stock market investment group can be huge learning opportunity and give you a chance to socialize apart fetching you good profits in stocks.

The market cycle of boom and bust, bulls and bears could be attractive as well as intimidating to any investors. Speculators are in for short term profits and momentum in the stock market and day traders get in and get out of the stock every day or several times a day. All these may make stock markets seem like a gambling den for any laymen.

The stock market is not all about speculation or trading. It is a place where companies sell a stake in their business and raise finances to fund their activities. Great wealth and fortune can be created by serious investors. They can create wealth for themselves as well as the company and the nation. Before investing in any company you must make informed decisions. You have to know and learn about the company you invest in, from past records, the quality of the management, their business activities and future plans.

One important way of knowing about the company is dividends. Many investment analysts and experts may say that dividend payout is not important for a stock to perform well. Many have even justified the idea that companies which do not pay dividends have created more wealth for the shareholders as these internal accruals can be used to further the business activities of the company.  But irrespective of all such economic theories a simple and foolproof method of confirming if a company is really doing well is to keep a track of the dividend income the company pays to its share holders every year. The aim of any business is to generate profits and revenues. By owing a stock you own a business and you need to get proportional share of the profit. If the company is not paying any dividends it theoretically means that it is not generating any profits

If the dividend rates have been increasing every year we can be sure we have a safe stock. Now that such a company is bound to grow and create more wealth in future you can use all the dividend money to buy more of the same stock. Here you the shareholders are empowered.  This will also mean that the dividends that you will be receiving each year will be more and more as you will have more shares in your portfolio.

This is the type of assured investment plan the investors must be doing. This is how real wealth can be built in the stock market. Many times the performances in the stock market may not reflect real economy. Sock market is driven by sentiments. We have seen in the past how the so called internet companies share prices went to dizzying heights when they never generated (nor had the hope of ever generating)  a single dollar in profit year after year.  Ultimately reality sunk in and these companies are now junked and are not even being traded at a fraction of their all time high prices.

When you invest in a dividend paying stock you are not at the mercy of the market sentiments. Irrespective of whether the share price goes up or down you will earn cash dividends. Even if the share price falls you can use the dividend amount to buy shares at lower prices and you have cost average advantage.