Solid Gold Investing Tips: Don't Forget the Basics

Learning sound investing tips can make a big difference in the success of your investments overall. When you plan on getting involved in the financial markets, you need to have a basic understanding of how they work and how to be successful. By learning some of the basic principles of investing, you can significantly reduce your learning curve and learn from the mistakes of others. Here are some of the best investing tips that you can work with.

Stock Is Ownership

Many people make a serious mistake when they are trading stock. With the emergence of online trading, it is very easy to get caught up in the fast pace of the market. It is very understandable how some people can look at stock as if it were some product that you can buy that will make you money. Many people look at their online trading platform as an ATM that can deliver them an unlimited amount of cash. People need to remember that when they buy stock in the company, they are simply buying ownership in a company. Every share of stock represents a certain percentage of ownership in the company. You need to act as if you are an owner in the companies that you own stock in. Remembering this basic information will make you take the process much more seriously and you will generally make better decisions because of it.

Earnings per Share

The earnings per share is a valuation multiple that many successful investors use religiously. Many people consider this to be the most important factor to look at when trying to value a company. This is a metric that tells you how much of the company's earnings are allocated for each share of stock in the market. If a company does not have much in the way of earnings per share, there is a good chance that the price of the stock is inflated and could be on the way down. If the company has a great deal of earnings per share, there is a chance that the price could be on the way up. Use this figure and other valuation multiples like it in order to come up with your assumptions about companies.

Short-Term Memory Loss

Many people make the mistake of worrying about what happens in the short term. It is only natural to be concerned with things in the here and now, but if you want to be successful in the market, you have to be able to block it out. Investors that take a long-term approach to investing generally are much more successful than those who worry about everything that is going on in the short term. The market is cyclical, which means that it goes up and down regularly. Instead of getting worried about a downtrend in the market, you should simply know that it will rebound at some point. When that happens, your investments that are down will be back up again. The purpose is to accumulate as many shares as possible in good companies; everything else will take care of itself.

blog comments powered by Disqus
Scottrade