What approach does a person take to begin investing in stocks

Do you fix your own car and do you heal yourself too?

Hire a Portfolio Manager.

scottrade

stockcharts.com

Depends on your level of risk. The other dude says to get out at a 5% loss or gain.

I look at things in a different light. do not invest unless you are willing to lose or win. No middle ground.

Find a sector you feel comfortable with, tech, energy, com., etc and study what is going on and more WHY.

I play in the energy sector mostly.

Not knowing more about u makes this comment a challenge. However, a good way to invest is in one of the American Family of Funds. You will find them at the tope of the list. If taxes r of concern to you, use a tax shelter with an insurance company. If u can use a little more life insurance, u can combine American Funds with a variable life policy. By so doing, u commit to a long term plan of investing in a tax sheltered environment, & satisfy some of ur insurance needs at the same time If u take time to compare, u will find this program to be very similar to a Roth IRA,

If u have further questions or would like to know which company I like, email me at

infosafemoney-plus.com

Keep it simple & follow some easy rules.

Actually, since so few investors r following these rules, I call them ''Secrets'':

Secret #1: Buy when the stock is moving up –
Don’t hold a stock when it’s moving sideways or going down.

I can hear u saying “I know THAT! Everybody knows that.”

Great, so if everybody knows that, why r only 5% of investors actually doing it?

The most popular stock trading strategy is to buy & hold a stock for a looooong time & strongly believe (or hope) that in the long run the stock market will go up. That is what I call the ''Showtime Rotisserie Strategy” ¬- Just set it & forget it.

Let’s take a look at an actual example: DELL Computer Corporation. Pull up a chart of DELL & try to follow me here. As u can see, the price of the stock was around $30 in the beginning of 2006. It went down as low as $20 & is currently trading at $23.78.

So let’s take a look at the performance of the ''Showtime Rotisserie Strategy” assuming a $10,000 account:

Bought 333 shares of DELL in January 2006 for $10,000.00
Current value of 333 shares of DELL at $23.78$ 7,918.74
Loss$ 2,081.26

That’s a loss of almost 21% (!!!).

Yet most financial advisors will support this belief by telling u that this is great strategy. They add some fancy words & call it “dollar cost averaging”.

Note:
”Dollar Cost Averaging (DCA) is an investing technique…. According to this technique, shares r purchased in a specific amount on a specified periodic basis (often monthly), regardless of current performance.” (Source: Wikipedia)

“Regardless of the current performance” – That’s interesting, isn’t it?

Let’s take a look at our example:
Let’s assume that now instead of investing $10,000 in the beginning of January 2006, u r investing $2,500 each quarter. Here’s the breakdown:


Bought 84 shares $29.75 on March 31st 2006 for$2,499.00
Bought 102 shares $24.46 on June 30th, 2006 for $2,494.92
Bought 109 shares $22.84 on September 30th, 2006 for $2,489.56
Bought 97 shares $25.71 on December 31st, 2006 for $2,493.87
Total Investment$9,977.35
Current Value of 392 shares $23.78$9,321.76
Loss$ 655.69

Wow, that’s much better, isn’t it? Now u “only” lost 6.5%!


Now let’s take a look at the chart again & apply our “secret:”
Buy when the stock is moving up –
Don’t hold a stock when it’s moving sideways or going down.

As u can see, we don’t want to own the stock for most of the year. With our trading strategy, we would have bought it in the beginning of October & just held it until end of December:

Bought 430 shares $23.25 on October 6th, 2006 for$ 9,997.50
Sold 430 shares $25.04 on Dec 29th, 2006 for$10,767.20
Profit$ 769.70




Let’s compare:
''Showtime Rotisserie Strategy”$ 2,081.26 Loss
Dollar Cost Averaging$ 655.69 Loss
Our “Secret” Strategy$ 769.70 Profit

As u can see, it is common sense to buy a stock only when it is going up, but only 5% of investors r actually doing it.

Why?

Bear with me, I’ll explain it to u in a couple of minutes.

But first let’s talk about

Secret #2: ALWAYS know when u exit–
Know when to exit with a loss, & when to exit with a profit

That’s where the rubber hits the road. Let me tell u this important concept:

Paper Profits r worth NOTHING!

What does that mean? – It means that ur profits only become profits when u actually SELL the stock & put the profits into ur bank account. As long as u still hold ur stocks, these profits r “unrealized profits” & can disappear within a few days.

Here’s an example:

Let’s say u were smart & applied secret #1 to GM (General Motors). You invested $10,000 in GM in May 2006 & bought 383 shares at $26.09.

In November 2006 u were a very happy camper: GM went up & ur shares r now worth $13,489.26! You knew (even without ur calculator) that u just made around 35% on ur initial investment of $10,000. You want to reward yourself & ordered this nice 60” Flat screen that they had on sale during the Thanksgiving weekend.

But then it happened: Bad news hit the wire & within 2 weeks GM shares fell 16%. Suddenly ur initial $10,000 investment was only worth $11,352, & instead of the 60” Flat screen u now had only money for the 42” version.



Bottom-line:

ALWAYS know when to exit! Paper profits r just that: Profit of Paper.

You should NOT expect to make 50% on a single trade. Here’s the secret that professional traders use: They realize small profits, & they do it frequently.

How do u make 25% profits per year? –
You make five times 5%!

So here’s the “secret” to trading riches:
1.Buy a stock
2.Hold it for a short period
3.Realize 5% profits
4.Do it again!

Ok, now u understood the concept of taking profits.


What about losses?

Same here: Get out quickly!

Don’t wait until the stock goes down 10%. 20%...30%.. 40%.
Get out when the stock goes down (Remember Secret #1) & wait until it goes up again.

Many investors like to apply a so-called “stop loss.” This stop loss can be expressed in dollar or as a percentage of the current price. As soon as the stock hits this stop, they sell.

As a rule of thumb u should use a stop loss of 2-5%, depending on ur risk tolerance & trading aggressiveness. But isn’t it better to get out with a small loss of 5% than seeing ur portfolio shrink by 20%.. 30%.. 40% (as in the example of DELL above)?

You bet it is!

Therefore ALWAYS know when to exit!


Secret #3: Pick the “right” stock
Aaaaahhhh, here we go!

Did u ever experience the following situation:
You picked a stock (e.g. INTC – Intel Corporation) & then the stock did not really move. And even worse: At the same time another stock that u wanted to buy (but didn’t) is shooting up like crazy.


Here’s an example:


Take a look at INTC (Intel) & at IBM. While INTC (“your” stock) is just hovering around 21, IBM really took off.
Now, here’s the problem:

Currently there r more than 10,000 stocks traded on US exchanges. So how can u pick the “right” stock; the one that’s going up?

For this task u have to apply some “filters”:
1.Only invest in stocks that r traded on a regular exchange (no “pink sheets”).
2.You should only invest in stocks that traded with at least 15,000,000 shares per week to avoid a manipulated market.
3.Don’t invest in “Penny Stocks” (less than $1.00 per share), unless u like gambling.
4.Make sure that the stock that u want to invest is in a nice up move (remember Secret #1).


Yes, I can hear u saying “That sound easy, but I know that it isn’t.”

Well, u think that it is difficult because most probably u used the wrong strategies. Or maybe u didn’t use any strategies at all, because u liked the idea of the ''Showtime Rotisserie Strategy” - Just set it & forget it :-)

Always keep these simple ''secrets'' in mind when u want to start trading, & do not let ''the other folks'' confuse you.

Hope that helps.

First of all you have to always do your homework before you buy any stocks. You should go buy the book Jim Cramers ''Mad Money'' and look up the guy Warren Buffet. Check what he is doing because he is one of the greatest investors in the world.

Here r tow great resources for you!

Wells Trade
wellsfargo.com

ShareBuilder
sharebuilder.com

You can also purchase a MUTUAL FUND or INDEX FUND to let a professional invest on ur behalf as they do the research & asset allocation & diversification.

Sharebuilder is a great start.

You call also purchase shares of many of ur favortie companies directly through theire DRIP's. Direct Stock Purchase Plans.

GOOD LUCK INVESTING! :-)