how to buy stocks online | 10 STOCK BUYING TIPS FOR DUMMIES

Here are some basic stock buying tips for dummies or beginners or whatever you want to classify someone who is new to investing. While these are basic tips, you might be surprised at how many people are guilty of doing some of these:

1) Never invest any money in stocks that you can’t afford to lose. This is perhaps the most important thing any beginner should know and follow. You CAN lose money in the stock market and this has never been clearer than in 2007 and 2008. Practically everyone in the market lost money and those who had all of their retirement money invested are in serious trouble now.

2) Know your time horizon. Stock investing should be a long term game. If you have money that you know you will need soon, it should not go into stocks. This is similar to #1 in that you should only be buying stocks with money you will not need for at least 3 years and preferably 5 years or more.

3) Know your risk tolerance. Investing in stocks can seem a little like gambling because you will be up or down every day. If you don’t have the stomach to take these ups and downs in stride, your money may be better invested in something safer and less volatile such as bank CD’s or government bonds.

4) Don’t blindly listen to the stock picks from stock “experts” on television and radio. You can get picks from the pros wherever you turn but you rarely know whether they have ulterior motives. It is easy to come up with a stock pick and anyone can do it so why would you listen to the stock picks from these supposed pros when you have no idea who they are, whether they really know what they are talking about, how much research they have done, and whether they have any of their own money invested in those picks?

5) Don’t immediately sign up for the cheapest online broker. When you are buying stock for the first time, many beginners automatically go with the broker who has the cheapest trades. They never bother to take into account other fees the broker might have such as inactivity fees and other things that might make a difference. Online brokers are starting to be more like banks: they are starting to slowly add charges for things that used to be free.

6) Some cheap stocks have low liquidity. A favorite thing for beginners to do is to buy very cheap stocks and penny stocks. This is because they don’t have too much money to invest and it must give them a better feeling to be able to buy a larger number of shares than they could with a more expensive stock. What they might not realize though, is that these cheap stocks may be harder to sell when they want to because of low liquidity.

7) Investing without a strategy. Stock market beginners may just jump right in and buy stocks without having any plan or goal. If you don’t have any plan thought out ahead of time, it will be difficult to decide when to sell the stock you have bought. Good investors have some sort of exit strategy in place that will help them decide when to sell no matter whether the stock is going up or down.

8 ) Don’t fall in love with a stock. Beginners and experienced investors alike sometimes have the tendency to hold on to a stock too long. This is because they made the pick and they don’t want to admit they were wrong if it goes down. They might also hold on too long when it goes up hoping that it will continue to go up and they end up losing much of their gains before they finally do sell. You need to take your emotions out of your stock buys and sells.  

9) Not diversifying enough. You hear it all the time and it is true: you should have your money invested in different stocks and different investments vehicles as well. If you put too big a percentage of your savings in one stock or one industry, you are opening yourself up to too much risk. You should probably not have 100% of your savings in the stock market either in case there is a bad stretch like the one we have just seen.

10) Don’t “time” the market with your buys and sells. People who try to guess what the market is going to do invariable end up doing worse than they would have if they had just bought a stock and held it. No one can see the future and to believe that you can guess where the market is going on any particular day or month is just not being truthful with yourself.

These are 10 stock buying tips that are a good for any investor. Figuring out what stocks to buy, when to buy them, and when to sell them are very difficult decisions that confound many stock investors of all levels. If you can avoid the mistakes mentioned above, you will be one step closer to becoming a solid investor and having the best chance of growing your money for retirement.