Stocks Basics: Buying Stocks

1. Using a Brokerage

The most common method to buy stocks is to use a brokerage. Discount brokerages offer little in the way of personal attention but are much cheaper.

2. DRIPs & DIPs

Dividend reinvestment plans (DRIPs) and direct investment plans (DIPs) are plans by which individual companies, for a minimal cost, allow shareholders to purchase stock directly from the company.

Buying Stocks and the Importance of Correct Timing

By Chris Perruna

An investor can find and research the best stock on the market, one with huge potential but if the general market indices are negative, it will most likely be the wrong time to buying stocks.

A stock with tremendous accelerating earnings, rising sales, an up-trending chart pattern and a strong industry group may sound excellent to buying stocks but will mean absolutely nothing if the market is positioned to move in the opposite direction of your expectations.

As soon as a stock is purchased, the time comes for an investor to make a decision to hold or to sell. If the position shows a profit, hold as your judgment is correct. If the position shows a loss, cut it quickly and don’t rationalize the situation before it doubles in size. Timing will play an important role in determining if you are right or wrong.

If the market was trending up, a “test buying stocks” would not have to be established as the market direction would have been clear from the beginning.

When it comes to timing, an uneducated investor may realize better gains during a solid bull market based on pure luck than a seasoned investor will return in a sideways or unstable market. Technical analysis along with confirmation of the market trend allows us to see the combined thought process of the general public and tells us if the timing is right to buying stocks or short a specific stock, regardless of the fundamentals.

Buying stocks during a down trend is a sure way to multiple losses that are cut quickly. The timing may be off even though the stock and research is favorable. If it doesn’t, get ready to get slaughtered, especially if you don’t follow strict rules to cut all losses quickly.

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