Many people make the use of a financial advisor the best kind of one to use as a financial advisor that you pay a salary to who is not trying to sell you something. The financial advisers who are selling stock just plain have too much of a “Ax to grind” and should be avoided.

If you choose to pick your own stocks you do not need a financial adviser because if you lose money the only one you have to blame is your self. Buying stock in a company is a gamble but at least you can cut down the odds if you can't read a financial statement. This is what tells you what kind of shape the company is actually in. By reading the entire document you can also get many clues as to how the stock is apt to perform.

The actual mechanism of buying a stock is something that is performed by a broker. The only way you can buy a stock directly is from a company you already own stock in providing they allow for internal stock purchases. This way you avoid paying a commission to the broker.

If you decide to do your own market research there are several inexpensive online brokers that you can use. They have the advantage of receiving an extremely small commission. Other brokers receive much larger commissions, but they are full service brokers. As they also act as financial advisors receiving a commission on the stocks they sell.

Just remember that by investing in the stock market there are times when you think you might just as well have gone to Las Vegas with your money but the stock market rises and the stock market falls and the sun comes up in the east every morning.

“Wider share ownership”

The 1980’s saw a huge emphasis in the UK on “wider share ownership” and subtly avoided reference to history.  (This was same mantra of the days, months and years preceding The Great Depression following the great stock market crash in the USA in 1929!)  In England, many companies were denationalized and it was “a dead cert” that you could ‘stag’ the new shares in these companies, that is you could sell them on the first day or week of trading and you would almost certainly make money.  Generally, for most of the newly denationalized companies this was true.  It was a question of how many shares you could initially apply for: the more shares you were allocated, the more money you made.  You took the risk that you would lose the interest on your savings if you did not receive the allocation you applied for and had to wait for your refund cheque.  And thus, the mantra of “wider share ownership” gained momentum.

What is a share?

Common sense goes out the window when your focus is on numbers, growth and making money.  So, what is a share?  A share is what it says: a share, or a percentage.  That percentage might be a millionth or lower.  It’s a share in the ownership of the company you invest in.  But, most of us don’t think of it as an investment in a company which will be tied up for many years.  Let’s be honest: it’s a speculation; it’s a hope that we can sell the shares within weeks, months or maybe next year and get a nice return, just like we read about in the successful investor testimonials.

What you will forget: it’s a market

Your local market probably sells fruit, vegetable, cheese, meat, clothes, replacement parts for your vacuum cleaner and car.  Via brokers, the stock market sells a range of shares in a range of companies.  Those companies are publicly listed.  They have to publish their performance publicly because they become reliant on their stock market listing for their funding.

So, you have bought shares or ‘stock’ in a particular company or some companies.  The companies probably have either an established track record, great prospects or are in a sector (retail, commodities, builders, pharmaceuticals etc) which are getting lots of positive comment from respected commentators like stockbrokers, investment gurus, newspaper columnists. 

Can you or other private investors influence a company’s ability to trade and perform profitably? If all private investor’s took an ethical stance, for instance, surely that would prejudice a company?  Wouldn’t it?  If a thousand private investors protested vehemently about a company’s strategy, the chances are the company would be irritated by the bad PR, but the combined shareholding of those investors would be less than 1% of the company’s issued shares.  Do you think you can make a difference?

Have you studied who owns the company you have bought shares in?  In fact, which investors own many of the listed companies?  With unsurprising regularity the same names crop up.  Across the sectors, insurance companies and banks commonly own at least 3% and are the main investors of many publicly listed companies.  If you look at the mining sector, the developing mining companies are being sponsored by the mining giants.

In the local market, stall-holders or traders sell.  Customers have a look and buy what they want.  Somehow, you have been introduced to the idea that it would be ‘cool’ or sound to invest in a company and get shares because in your own way you would be helping the company to make further developments and ultimately the economy will benefit. Won’t it?  No.  Your money, unless it represents at least 3-5% of the value of the company, won’t make any difference. 

Shhhh.  Don’t tell everyone

This is a market.  But it’s not your market.  You can usually only buy shares through a broker and they will charge you a dealing fee to acquire the shares in each company in which you invest.  Brokers generate income through other sources but getting dealing fees is good income.  If you buy shares, you merely ensure that brokers earn additional income through dealing fees. 

I repeat, this is not your market.  The shares which are on offer are being displayed for other buyers.  Those buyers are specialist investment managers who look after investment funds for major insurance companies, specialist investment companies, banks and pension funds (“big players”).  In a market, the buyer wants what is most attractive.  And that means when something slightly more attractive is available, those shares held in a company which now seems less attractive get offered for sale on the market to another big player who sees an opportunity to make money.

What you think affects performance

Profitability is surely the key?  The company you like is an established name, has great products, everybody has heard of them, they are sound financially and have a track record of reliable profits.  Bigger profits, better dividends, the price just has to go up.  Sure enough, record profits are reported.  And then something weird occurs.  The same day, the share price drops – plummets, more like – 8%.  Why?  A number of reasons.  It wasn’t quite what the performance analysts anticipated.  Maybe the investment analysts perceive that is the end of record performances and from now on the company will struggle to match this year’s performance.  Or maybe the company’s spokesperson has observed the current economic situation and hinted at more challenging conditions for the company looking ahead. 

Lessons you learn by experience

Eventually, you will build up experience of trading in shares and making big gains, small gains and some losses through sharedealing.  The mantras that ‘past performance is no guide to future performance’ and ‘shares can go down as well as up’ will, however, take on significance when you have your first big loss.  It will happen. 

Strangely, when a company’s share price goes down 9% in one day then calms for a couple of days, you don’t get the same euphoria when the price improves 8% on another day.  They still need to go up at least another 2% for you to be in the same position before the 9% fall.  ‘Greasy pole’ and ‘climbing’ sound familiar?

It’s easier for your shares to lose significant value quickly than it is for them to gain significant value quickly.  In more than 20 years, I have experienced heavy losses in value which occurred like lightning.  I have never experienced a fast massive hike in value on any shares I have owned.  Unlucky or normal?

‘Pound cost averaging’.  It sounds impressive. It means buying shares at different times which averages out the overall price you have paid for your shares.  So, buy more shares when the price is falling because you are getting them cheap, you’d think.  It makes sense.  However, the stock market is not founded on sense.  You will increase your losses.  The trend may be that your company and others in its sector have further to fall in value because they are out of favour with those who make the market tick, i.e. the big players.

Investment analysts, commonly working within stockbrokers and for investment fund organizations, are constantly advising the big players on how any one company or a sector is performing, their prospects, strategies and a company’s order books, and how global and national economic factors will influence the company’s performance.  Depending on how their advice is received, the company’s share price will be reflected as the buying and selling of shares occurs on a daily basis.

Share prices don’t respond in line with your thinking as a private individual. 

You are not the market.

You do not influence the market.

A lesson repeated

Private investors are useful to the stock market because the more they deal in shares through brokers, the more fee income brokers earn.  Advertising “wider share ownership” and cheap dealing fees will continue to attract private investors because most of us can do basic maths and we understand the concept of multiplying numbers equates to creating bigger numbers.

Investors affect the overall performance of a company’s share price and the whole market’s performance.  The thing to keep in mind is that you and I are not included within the definition of ‘investor’.  You and I are players.  But we are not ‘big players’.

Players are always invited to participate and will come back to play because of the prospect of making serious money in the market.  The stock market is for big players, those who have and are willing to commit six figure sums and multiple millions of pounds to fund companies they believe will yield a good near-term and longer term return.  This in turn enables investors themselves to reward those who have invested in them and their skill in understanding the market, but on the basis of longer term performance.

Remember…

You are not the market.

You do not influence the market.

Share prices will go up and down.  You can’t guess in what ratio!

You are unlikely to get out of the market without some scars.

If, as a private individual, you consistently make money by share dealing, it’s by luck not by skill.

So, did I mention Tantric Medicines Plc at 7pence?   They look a great prospect!!

It is based on optimism for a bearish trend immediately after you purchase a stock. Only seasoned traders should try short selling. Even for them, short selling is sometimes can lead to a panic situation. For a short seller there are some precautions to be taken in order to reduce the loss in the event of price going up. For this he can place a pending order for buying at a higher rate by setting a trigger price. This is commonly known as placing a stop loss. If you have setup a stop loss for a particular stock, the system will automatically purchase the stock when the price touches the trigger price.

Short selling is for those people who knows the share market in and out and who like to take more risks. The larger the risk, the more will be the chance for more profit or more loss. If you are a new player in the stock market, never try this as it can land you in trouble, because you are selling something you don't owe. If the price goes up then you have to face the consequences. Either you should buy the share at a higher price booking heavy loss depending the sell-buy price difference or if you can’t buy you have to pay hefty penalty.

• Computer Industry

  No matter how hard the economy is hit people will almost always be buying new and better computers.  There are two paths to follow on this: the software producers and the actual computer manufacturers. I would strongly recommend going with Apple simply because they produce their software and own computers. If your looking for something cheaper, go with Microsoft, but it does have a lower rate of making more money.

• Car Industry

  Investing in this right now is a death sentence.  The very last thing a recession-hit family wants to do is buy a new $30,000 car.  This is said for engine makers too, without the car companies buying parts, they will probably go out of business(fast!).  

So there you have it the ones you should buy, and one you should definitely avoid.

Look out for the side-effects of this as it begins to ripple through the economy which is already suffering as a result of high gas prices and failing mortgages. If you thought we were in a credit crunch, the chances are that things will only get worse unless the world's leaders and economic giants get together to resolve the downturn in the economy.

How will it affect us?

The economic crisis will have a domino effect as business after business has to fold as can be seen already in some high profile cases. The collapse of travel companies, airlines and other related businesses will most likely have long-term effects on the travel habits of regular holiday makers, with people deciding they can no longer travel abroad as they used to.

I try to read many things about stocks. I want to get knowledge, as much as possible although I will "hide" behind my broker in this investment activity. I read that this time is "the decade's most irresistible opportunity." Actually I also just read in a newspaper that stocks have been in downtrend in my country this year. The condition in my country Indonesia and it in United States of America are almost the same, as Indonesia is the Asia country, which is most affected by U.S.A. economic situation. Many people are worry but experts said things are just too irresistible right now; it's time to buy the stocks!

The ideal situation to buy stock is when we can get all three of these together: cheap, in the beginning of an uptrend and "hated". These three things are happening now.

Cheap

In my country most of stock's prices have been fallen since the beginning of this year. Many people including government are worry if this downtrend is continuing. Whatever, stocks are cheaper now, perhaps than they've been in more than a decade. If you have been waiting for cheap prices of stocks, now the stocks' prices are cheap.

In the beginning of an uptrend

No sector in the U.S. is up over the last 12 months, except a few oil stocks. It's been a horrible grind. Now it feels like "you can't go right" investing in stocks, which is usually when it's least risky. Sounds difficult. While experts don't have confirmation of the uptrend yet, they do have two of the three things to see and they see buying stocks is more attractive now than it has been in over a decade. The experts are expecting to see stocks start a nice rally from here. They will see the uptrend soon.

Hated

Just recently, a poll found that professional investors are more bearish than they've been at any time in the last decade. Whenever investors get really bearish, stocks are generally near a short-term bottom. From the past experience whenever investor sentiment reached a bearish extreme, it always turned out to be good for a short-term rally in stocks. In bear markets (situation in which share prices are falling rapidly and therefore attractive to people who sells stocks, hoping to buy them back later at lower prices) those rallies are short. In bull markets (the situation in which share prices are rising), the rallies are strong. Judging by the “Investors Intelligence” poll: Stocks are "hated" right now.

Right now, the two criteria (cheap and in the beginning of an uptrend) are at "best in a decade" levels. So, though it feels extremely risky out there now, it's probably the least risky time to buy stocks in the last decade. We'll have all three buying criteria in place. That rarely happens, and we should take advantage of it.

It happens, so don't hesitate. Buy the stocks.

For example, you might buy 25 shares in a company which we will call Alpha and each shares costs you $1. You total investment is $25 for those 25 shares.. You put a stop loss order on your investment, predetermining that you will not risk losing more than 20% of your investment. This way, when the stocks lose $6.25 you can sell them to make sure that you don't lose any more money. You will be protecting yourself against losing more than 20$ of your original investment by putting the stop loss order in place as soon as you buy them.

The big advantage of a stop order is that you don't have to keep checking your stocks every day because once your predetermined figures are reached, buying and selling will take place automatically. There is no need to worry in case you have missed major changes in the price of your stocks which can happen several times a day during active periods. This is very useful if you are a busy professional person who finds it difficult to find the time to do this.

The disadvantage here is that you stocks may be rising rapidly in price but you can't change your mind and hang on to them a bit longer in the hope of an increase in your profit. you may notice that one of you stocks has shown no losses for a long time and is holding steady but you have to sell it once it shows the percentage of profit you decided on in the beginning. You could be losing potentially larger profits by doing this.

A stop order can protect your investment and regulate losses but if it is applied when it isn't really needed to protect an investment, it can stop you making higher profits and actually cost you money in the long run because you cannot change your mind if your stocks start performing much better than you had thought they would..

Here are a few tips you can use to invest in stocks. These are my personal views, but supported by sound arguments. The good thing about these guidelines is that they are not at all difficult to follow:

• Whenever you may have heard any suggestions regarding stock investments, one thing that you would have invariably heard would be: Invest long term. As I mentioned above, the human factor is crucial in stock markets. The reactions are swift and, if you are a short term investor, you may be left high and dry. But in the long run, companies grow and with them their stock values. Only care you have to take is the choice of companies.
• Invest only in shares that are included in the major index of that particular stock exchange (Sensex for Mumbai Stock Exchange, for example). Only the leaders in their respective fields are included in the index. Also, there are criteria relating to trading volumes based on which the stocks are selected. Even the governments are interested in the stability of a major index, as it an important indicator of a nation's economic status. By following this guideline, you minimize the chances of loss in many ways. I list here two 1) There is less chance of a company losing out 2) you would avoid as much as possible the possibility of not finding buyers when the stocks are going down, and you need to pool out.
• Link your portfolio to the index. That is, first study the trends of the index for the past few years. Say, the lowest the index went in the past three years, it was at 600. Make it a benchmark. Never invest all of your money if the index is higher than this. Keep at least one-fourth of your money; it should be invested only if the index goes below that benchmark.
• Set at least two more benchmarks, dividing the rest of your money into as many parts
• Invest at least half of your money for long term, and invest it when the index is lower than corresponding chunk of money. Say, you have divided your money like this:

$1000 Index range 600-700

$1000 Index range 700-800

$1000 Index range 800-900

Now, if the index is at 600, you would have $3000 invested in the market. If it is at 850, then only $1000 should be kept invested. In other words, as the index goes down, keep investing more, and vice versa. Keep an eye on individual index companies. One of them may be going in the opposite direction.

Its not all that difficult to understand the day to day happenings of the stock market. Once you start involving yourself in the market you will tend to forget everything and when I say everything it literally means everything except the stock market. Anyone can make a lot of money from the market provided he follows the principle of total control over himself, one must never get temp no matter how good the opportunity is, the most important thing is never to day trade in the market, which basically means buying shares and selling the same shares on the same day.

The most important principle which should be followed is trading on an investment basis, which means you build a portfolio which includes all your top shares, give your investment some time to come up. See the right opportunity of buying shares for a long term plan. When there is a slaughter in the market and you firmly believe that the sensex (as it is known in India) or the Nasdaq will not take any further correction that is the correct point to buy your shares for a long term.

Never be hasty and never run out of patience, always be hopeful that your shares will do good over a period of time. Never think of making money on a day to day basis, thats the biggest mistake which people make. Invest only a limited amount of your total capital never take a very big risk in the market, simply because it's impossible to predict what is going to happen in the market.

This is from personal experience and I firmly believe that experience is the best teacher. There are a lot of things which effect the market, like how good the countries' economy is doing? How much is the inflation rate in the country? Always keep in mind all the important things and then pick your scripts and show a lot of patience and content.