There are several theories, or ways, to invest in the stock market. The first way is as a long term investor and the second is investing for short term gains. The two require completely different approaches.
How to invest in the stock market for the long term.
Many long term investors chose a focus. Some quite successful investors begin with companies that produce products that they know and love. They understand that quality products and good management keep the company growing. Another method of picking a stock for the buy and hold philosophy uses knowledge of a particular sector. Perhaps the investor has a background in the trucking industry and knows about a quality company that operates using basics that he knows makes them money. He uses his knowledge of the industry to pick that companies stock. Frequently investors pick a stock because of innovations that they hear a company is about to announce or has brought to the market.
Long term investors also select stock based on statistics from the company’s history. Often the history of profit growth and sales provide statistical material to forecast the future of the company. Capital asset pricing models provide information on the return on capital for longer term investors. Information on the history of the management of the company gives a track record of not only the manager but also the longevity of the management. All theses tools, plus the fit for the investors portfolio are done either by the investor or by a service that does recommendations.
How to invest in the stock market for short term investors.
Short term investors are divided into two types. One method of short term investing use economic conditions to purchase stock s that they believe grows in that type of climate. Economic recession calls for value stocks and stocks that produce dividends. These types of stocks become important since interest rates unusually drop during those periods to stimulate the environment. Frequently the return on the dividends is higher than the interest at a financial institution and the stock also holds apprendre la bourse the potential for capital gain. As a recession ends and the economy begins to grow, these types of investors turn to growth stock. These types of investors look for indications that particular sectors, like oil companies when the price of oil increases. Often these investors use the services of financial magazines and websites to forecast the appropriate time to trade.
The second type of short term investor is the day trader, or very short term trader. These investors use the daily price as an indicator to make trades. They watch for ceilings and fluctuations that occur on a regular basis. Many computer programs analyze the various indicators found when the symbol is input and the daily pricing history is evaluated. The problem with most services is that they seldom select the stocks to analyze. This job is usually left to the day trader. There are thousands of stocks so a lot of time is spent finding the right one.
The sole purpose for short term investment is to buy low and sell high in a very short period. The percent of return doesn’t need to be high and some day traders settle for a few percent, but repeat the process daily. Just a 2% daily return becomes 500% over a year. This means that $500 could become $25000 by the end of a year if it is achieved daily.