Want to know a secret? No telling OK? OK, I can trust you – Im about to let you in on a few tips so that you can begin investing in the stock market and finally start to see some cash back in your pocket. That means you can afford one of those gorgeous lounge pool thingies with a drink holder so you can lie back in the sun while you watch your investments increase in value and make you some lovely profits. Because I wouldnt want you to spill your drink in the pool would I – that wouldnt make any sense at ALL in an article about investing in stocks.
Cool. Now obviously Im going to make this easy for you – Im all about making things easy – (but that doesnt mean that I AM easy, OK?)
Firstly you need to pick some stocks. Duh! But not anyone old stocks of course. I recommend just choosing those that are listed within the S&P500 list since they contain the top 500 companies based on market capitalisation in the U.S. That just means that they are the biggest and most well known and therefore the ones that you should concentrate on.
Or if you are incredibly lazy like I am, you can just choose the stocks within the Dow Jones instead – because there are only 30 companies in the Dow – and therefore FAR less to choose from and so your research time will be cut way down (and so more time for pool sunbathing).
You might wonder why Im not suggesting that you pick some small obscure company at random to invest in, and basically its because the bigger companies are considered much safer than the smaller unknowns. Sure you could choose the winning stock and triple your money overnight, but its just as likely as you could lose your money as well – and you dont want that.
So trust me and stick to the bigger, more well known ones.
The next step is to have a look at those companies financials to find out how well they are doing for their stock holders. I know – it sounds incredibly boring to want to look at a profit and loss sheet without being tied to a chair against your will – but if you are going to be a serious investor it has to be done.
What you should be looking for is a company that fits certain criteria such as a good return on equity, positive earnings and one that doesnt carry too much debt.
You can avoid choosing really bad stocks by checking out whether the company is doing really well financially or not. For example did you know that you could have avoided disasters like Enron just by looking at its debt to equity ratio? True!
By understanding what you are looking for youll be investing in the stock market like a pro in no time. Now if youll excuse me Ive got another drink to pour.
Tracey Edwards is the sassy author of “5 Simple Rules for Investing in the Stock Market.” Find out more about investing in the stock market at her blog and dont forget to say hi when you drop by. http://simplerulesbooks.com/investing-stock-market-hard-not/