"You should play the stock market."
This was the advice I was given sometime in 1997. It sounded impressive. But, since I did not know too much about shares or the stock market, I asked a colleague for help.
The initial part was simple: opening an account with a stock brokerage company. What next? This time, my knowledgeable colleague had no light to throw on the subject.
So I decided to get into the game by myself.
Grasping the Basics
The first thing I did was log on to Yahoo finance. On the top of the screen, I saw Dow, Nasdaq, S&P 500, NYSE Volume and Nasdaq Volume. What on earth did these terms mean? And volume? Isn't volume related to space?
It did not take me long to figure out they were just indices, like the Sensex. The index has just one job — to capture the price movement. So a stock index will reflect the price movements of shares. Since stocks are supposed to reflect what companies expect to earn in the future, a rising index indicates investors expect better earnings from companies and vice versa.
I soon learned how to get quotes and how to place an order for a stock. But I had no idea there were a variety of orders: market order, limit order, stops order... to name a few.
"Do you plan to buy growth stocks or value stocks?"
Huh? What on earth was the difference? Logically, growth stocks are those that grow and have great future prospects, so are they not valuable? And don't value stocks have the potential to grow?
"You should apply technical analysis to your stock picking strategy," another stock guru told me confidentially.
At first, I thought it would be too complicated for me to handle. Then, I figured it out. Actually, it was quite simple. Stocks on the uptrend in the graphs tend to go up, and stocks which show a downtrend tend to go down. I could never figure out what was so technical about that!
"I will give you a surefire way to make big money." This came from a dear friend, so I was all ears.
Article comments
1 - Dave Nalle
You should consider retitling this something like "Lessons in how not to manage your portfolio". Nothing worse than a skittish small-scale investor. You've got to be prepared to stick things out for the long haul. If you don't have the skills and temperament to be a day-trader and turn stocks over rapidly, then you need to focus on long-term investment, not just buying stuff that catches your eye and trying to guess when the right time to sell is. Instead buy stocks that you don't expect to sell for a long, long time. Or just buy mutual funds and lie back and relax.
Dave