Stock Investing Advice

By Stock Research Pro • March 28th, 2011

The best stock investing advice you will get are tips and strategies that help you to break down stock investing into a manageable process that involves understanding your own financial goals, timeframes, risk tolerance and the experiences you can draw from as you make your investment decisions. In this article, we try to help you through each of these steps so that you can be a knowledgeable and well-prepared stock investor.

  • Define your financial goals- People invest in stocks for many different reasons. Some have long-term goals that might include such things as a comfortable or financing a college education. Of course as you’re working toward these goals, you’ll need to manage your shorter-term goals of making sure you have enough cash available (liquidity) for every day spending needs. In other words, you want to develop a strategy that will enable you to achieve those long-term financial goals without forgetting your current financial responsibilities. If you can arrive at a long-term financial target and factor in how much you have available to invest, this can be a good start toward determining the types of stock investments you should consider.

  • Determine your investment timeframe- Generally speaking, longer-term investors can look at different (higher risk, higher reward) stock investing options than shorter-term investors. If you’re in your early twenties and your goal is to have a very comfortable retirement, you could consider a more aggressive growth strategy than someone who is hoping to retire in the next couple of years and should be thinking about capital preservation.

  • Understand your tolerance for risk- Even investors who have a long-term investment horizon need to operate within a level of risk that makes them comfortable. As you know, the stock market (especially certain types of stocks) can behave with wild unpredictability. You need to strongly consider your ability to bear this before committing your money.

    • Take a risk tolerance quiz
  • Determine your level of investment activity and participation- Some stock investors make the decision to be actively involved and to manage their portfolio on an ongoing basis using elements of fundamental analysis, technical analysis, or some combination of both. Other investors choose to adhere to more of a buy and hold strategy under the assumption that well-selected stock holdings will increase in value over time. You need to also decide whether you will manage your own portfolio or seek the services of a qualified financial planner.

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    The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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