I would like to hear your views on the stock market. I'm a novice and just now starting to think about investing.
We have had a 5.92% correction on the S & P since its 1098 high. Most everyone is expecting a 7-10% correction before consolidation.
So, worst case scenario, a 10% decline brings us to SP 988, call it 990.
I don't believe that we'll see a retracement to last year's levels. Just a correction, since the market ran almost 50% from it's March 09 low. Without any real gap filling.
So, if you have had money sitting on the sidelines, waiting for a entry point, then this may be your last opportunity to invest on the cheap, for future high potential gains.
There are some great companies that are on sale right now.
If you do decide to invest, always do your Due Dilligence on any company that you plan to invest in.
1. Reading all current year SEC filings
2. Reading the past four Conference Calls, which is commonly referred to as the quaterly reports.
3. Google the company for any news. Do they have any lawsuits pending, any positive news or negative neew. This will affect the pps.
4. Go to a financial page, such as Fox, CNN, Yahoo, etc... and pull up the year to date charts for the company that you're interested in. Print them off and study them. When you become more comfortable with these charts, add the 50 day Simple Moving Average, the 200 day Simple Moving Average, and the MACD indicator with 10 day SMA. These three tools, will help you determine a entry point and a exit point in your company.
5. When you have finally found a company that you're interested in, DO NOT buy all in at once. Average your buy positions with 1/3 or better yet 1/4 entry points. You may be buying shares at a lower or higher price than your first purchase. That's ok. This is why it is called averaging in.
6. Have patience! I cannot stress this enough... You may get lucky and with your first comapny, you may see a upward trend in the price per share (pps), or the pps may delcine. Too many people lose their asses in the market by stressing out and selling when the pps goes down. Stocks fluctuate. If you have done all of your DD and are sure of your company, then you should not have anything to worry about.
7. NEVER PUT ALL OF YOUR MONEY INTO ONE SECURITY!!!!
This is a receipe for disaster. Always diversify with other companies in other sectors.
What would happen if you put $2000 into a company and the pps went down? You'd be on the losing side of a trade.
Now take $1k put it into A company and the othe 1k put that into B comapny in another sector.
Now if A company goes down some and B company goes up some, then you still have a porfoilo that is making money.
But remember, never buy in all at once. Buy in 1/4 positions, so with this one, you would take $250 for each company and buy in at different entry points.
8. For first timers, look into blue chip companies.
There is nothing wrong with buying into a company such as General Mills, John & Johnson, Coca Cola, McDonald's, etc...
These are names that have been around forever and will liely to stay around forever. Most, if not all pay a dividend (interest) on your investment.
9. Cheap companies are cheap for a reason.
I always do extra DD when I look at a company whose pps is less than $2. To me this is the first sign that this might be a distressed company. So, I'm doing extra digging.
Cheap companies, such as bio tech, usually do not have a market ready product. They mainly rely on hype on a new drug that they are developing. Can they pay off? yes. Can you lose your ass? yes. Companies, such as bio-tech are pure speculation. Gambling...if you will. If you decide to go this route, be prepared to lose, because most likely that you will.
10. Do not invest on anyone's advice!
Do your own homework. Cramer and all of the other talking heads on CNBC, are jackasses.
They are good for entertainment and gathering ideas from different sectors.
Never buy anything that they recommend.
If they say buy and you already own it, sell.
If they say sell and you are thinking about that company, get ready to buy.
Notice how I never once mentioned one real company? I don't want you to invest in my companies, based on my say so.
I'll give anyone ideas on sectors that I invest in, wher I made money. And I will throw out several companies in that sector that I'm invested in. One may be the company that I have in that particular sector.
Then it will be up to you, to do your own DD and make the decision that's best for you.
Take your time to study, read books, charts, anything that you can get your hands on.
I can recommend a fantastic book, that you can pick up on ebay or Barnes and Noble, but I'll not put the title out on here. PM me if you're interested and I'll provide with it.
Remember that smart investors, who are informed and know what to do when, will always win in any economy. Even in this one.