Candlestick Trading Blog
March 21, 2008
Invest in Stocks
Many people invest in stocks in order to diversify their portfolio. Before they can begin, they must first understand how to invest in stocks. Investment securities typically involve the situation where the investor is an owner or the investor is a loaner. For those investors interested in owner securities, they would invest in stocks, equity mutual funds, real estate, REITs, collectibles, commodities, and business ownership. For the owner, the asset is the common stock. When you buy a common stock, you actually become a part owner of the company which gives you the right to vote on issues at stockholder meetings, elect directors, and have additional responsibilities for the company that you own stock in. Loaner assets for an investor include items such as corporate bonds, U.S. Treasury Securities, municipal bonds, preferred stock, bond-mutual funds, certificates of deposit, and many more. The purpose of this article however, is to discuss how to invest in stocks related to owner securities. When investing in stock it is very important to hold stock that is in different stock market sectors. This again will ensure portfolio diversification and your protection. Investment advisors typically suggest that an investor holds at least 6-8 individual stocks representing different sectors. Listed below are the different sectors that an investor has to choose from to invest in stocks. 1) Energy stocks – includes oil and natural gas 2) Utility stocks – includes gas utilities, electric utilities, and telephones 3) Technology stocks – includes electrical equipment, wireless communications, computer hardware, and software 4) Industrial cyclical stocks – includes chemicals, metals, construction, aerospace, machinery, machine tools, building materials, and papers 5) Financial stocks – includes insurance, real estate, banks, brokers, and thrifts 6) Health stocks – includes health-care services, medical devices, pharmaceuticals, and drug wholesalers 7) Services stocks – includes waste management, transportation, media, personal and business services, and entertainment 8) Retail stocks – this includes all retail excluding drug wholesalers which is considered health stocks 9) Consumer staples stocks – includes tobacco, household goods, beverages, and food 10) Consumer durable stocks – includes house wares, multi-industry, autos and recreation and luxury Not only do you need to know what sectors to choose from when you invest in stocks, you must also know how to actually trade stock. This means that you must first know what stock exchange is available. There are two types of exchanges including the “listed” exchange and the “non-listed” exchange. The listed exchange includes the New York Stock Exchange (NYSE), and American Stock Exchange for those investors who want to invest in stocks. To be “listed” means that the brokerage firms contribute individuals known as “specialists” who are responsible for all of the trading in a specific stock. The specialists are also responsible for counting the number of shares that trade each day and then they report the count to the exchange in addition to the price and size of each trade. On the contrary the “non-listed” stocks are traded on the over-the-counter market. The NASDAQ stock market, the NASDAQ small-cap, and the OTC Bulletin Board are the three main over-the-counter markets. Instead of “specialists” the OTC market uses “market makers” to match up buyers and sellers directly, and to maintain the inventory of the shares to the meet the demands of the stock market. As you can see there is a lot of information necessary for an investor to learn to successfully invest in stocks. To further your education you can attend stock market training seminars, join investor forums online, and read a ton of books that you find helpful. Stock trading is a very competitive market so you must be fully-educated and have developed a stock trading plan that works for you. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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