New Investment Strategies
When you are first starting your journey into stock investing, you will have many financial questions on your mind. First, there is always the question of what are they talking about, which means you need to have handy an excellent investment dictionary next to you. You will learn lots of terms that may seem insignificant, but there are no irrelevant terms in investment lingo. Every term you hear has an origin, and it was probably created so that someone wouldn’t make the same mistake twice at some investment problem. You might hear terms such as Bull Market or investment spread, which are two of the most common terms new investors inquire about. Some may think a Bull Market is an investment in beef or cattle but it has a particular meaning.
Stocks rise and fall. For a stock to rise, many conditions must be met in the economy where stock becomes more valuable to consumers. If a company that sells the shares are providing new and better service or products regularly, then it generally means the commodity will be more valuable and investors will want to purchase them. The higher the volume of these stock shares that are purchased, the more the stock price is sold for since they are traded and sold at prices that change as investors are willing to pay more for the stock. If the stock rises 20% of its cost over a month, this would be an excellent investment as opposed to a decline in price the same percentage over the same period. The former is called a bull market for stock and the later a bear market for the stock. Investors have speculated that the bull thrust his horns upwards, while the bear swipes his paws in a downward motion. The bear is pretty tall (above his attackee), while the horns of the bull would come from below the person.
Should You Invest Low or High?
A common question of new investors is should they begin with a cheap stock or a more expensive stock. Tradition has proven that starting with less costly stocks as a training ground is a common practice until the investor can acclimate to his investment tolerance or risk tolerance. First, learn your tolerance level before purchasing expensive stocks. The degree of tolerance an investor has for losing or gaining his investment is the degree of understanding.
For example, if you cringe at losing a penny that falls to the floor, you probably have in-depth knowledge in finance. A high tolerance means that even if you lose all your money, you won’t flinch an eyelid but will keep investing. So it is a good practice for a new investor to find the best stocks under 5 and work with small priced stocks as a basis.
Secondly, use investment strategies. To guide your investments in the right direction, some very wise investors have created things like strategies that help investors to stay away from things in the stock market that jeopardize your investments. Having these tools for investing is simply called smart investing, but not everyone who reads these tips follows them and some end up losing big. The only way to know whether you have a mentality and knack for investing is to try it out. Some companies even give you an account and fund your account to practice with their money as a way to get you started. Investors are excellent about giving others plenty of ethical rules to follow.
Reasons for Lower-Priced Stock
The investment community looks out for one another because everyone wants to win at investing. Buying a low-priced stock gives the investor a feel for what can be done at lower prices so that the principles of investing are learned and the strategies are integrated into their investment decision making. Fourthly, investing in lower-priced stocks allows the young investor the time to develop a winning and rational approach for funding. Without a sensible strategy under your financial belt, it may open the doors to acting on emotion when investing. A savvy investor will put a stop order on his stock so that if the stock falls below 10% of what he invested in the capital, the sell order will kick in and automatically sell his stock. This is a very good strategy which you will learn as you spend more time in the investment world. Lastly, a savvy investor also places a sell order on the top end of his stock so that when it rises to at least 10% above what he purchased for the stock, he sells his stock and moves on to other investments.