Are you a Wall Street expert who navigates stock trading platforms?
Snacking on 50 Twitter shares at breakfast and then selling the stock by lunch? This is not the post for you. This post is for the regular Joe looking to invest a few bucks or have more control over their investments. These ten ideas, strategies, and subjects should serve as a strong foundation for your stock market education. They aren’t everything you need to know, and they don’t guarantee success, but they’re a terrific place to start for any investor.
Buy low, sell high sounds simple, doesn’t it? But, on the other hand, investing is one of the few areas of our financial lives where things are growing cheaper feels like a terrible thing. Few customers are complaining about lower gas costs due to the drop in oil prices during the last year and a half, but a small market decline is regarded as the end of the bull market.
These are not mutually exclusive facts: the current bull market will end, and equities have shown to be profitable investments that generally grind higher over practically any long-term timeframe.
There Is No Such Thing As A Certainty.
Oil prices at $100 per barrel are here to stay; Alibaba is a world-beating behemoth that cannot be stopped, and ESPN is immune to the shifting sands of the cable sector and its ability to make money for Disney never be questioned. Just three examples of once-true storylines that have been shot through with holes.
A word to the wise: common wisdom isn’t always wrong, but it often comes at the worst possible time. Some of the stock market’s top long-term investors — Warren Buffett, Carl Icahn, and others – have made their biggest bets on companies out of favor or under market hardship.
Long-term profits in stocks have generally been a safe option, but individual firms are intrinsically riskier.
3) Familiarize Yourself With Filings
While some investors believe they have a sixth feel for identifying good firms, the rest of us must do our research. There is no better place to begin than regular SEC filings by public corporations, which are obliged to explain everything from company finances to potential conflicts and risk factors.
The annual 10-K contains the most information, ranging from quarterly and annual financial figures to business line descriptions and management commentary on development potential and costs. Regulatory filings will also include information on any changes in senior management, acquisitions, and stock transactions by executives or board members.
All filings for U.S. public corporations and international companies that list on U.S. exchanges are available online via the SEC’s EDGAR system.
4) Believe Long-Term Taxes aren’t the only reason short-term trading is a loser’s game for the majority of investors.
Attempting to purchase or sell stocks based on a quarterly earnings report or an economic data point is a game for computerized trading platforms, not the ordinary Joe.
Better possibilities arise when a stock or industry is ignored by the market and languishes despite a consistent economic performance that will generate a continuous stream of profits for a long time. Like airlines and railroads, transportation equities have been out of favor for lengthy periods, only to see significant returns when economic conditions and business dynamics match.
Years of mismanagement in the airline business resulted in a succession of bankruptcies in the 2000s. Still, the next merger wave made American Airlines, United Continental, and Delta Air Lines more competitive and better positioned to benefit from trends such as falling fuel costs.
5) Dividends Are Your BFF
In 2015, Apple’s stock price fell from $110.38 to $105.26. This represents an 11 percent drop, whereas investors who held the stock throughout the year lost only 3 percent. Why? Because Apple paid out $2.03 in dividends during the year.
Dividend-paying companies aren’t immune to market drops, but they provide some protection that others don’t. A word of caution, however: large payouts that appear too good to be true typically aren’t. Just ask Kinder Morgan shareholders, who saw their quarterly dividend cut by 75% in December.