Topic: How To Invest

Want to learn about stocks and trading for maximum gains? Here are some key tips to get you started

Take the time to learn about stocks and trading and you’ll no longer look for “sure fire tricks” like market patterns that may or may not repeat themselves

If you are a new investor learning how to invest, our Successful Investor philosophy can give you above-average results when you practice it on a consistent basis. Think of and plan your investments as a portfolio, and your investment results will become more consistent, less time-consuming, and more satisfying than ever before.

Here are some more stock tips to get you started:


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Learn about stocks and trading beyond what a broker tells you in order to make smarter investment decisions

The online brokerage industry is winning a lot of attention and goodwill by offering “practice accounts.” A practice account is supposed to be identical to a real account in all but one respect: you buy stocks online with imaginary or “play” money rather than the real thing.

A practice account that lets you buy stocks of your own choosing online without real money may seem to be a convenient way to learn investing. But the big risk with practice accounts is that you’ll try out a risky and ultimately unwinnable investment approach, like day trading or options trading, and hit a lucky streak. This could embolden you to put serious money at risk just when your results are about to regress to the mean and deliver losses instead of profits.

Furthermore, the greatest risk you face as an investor is to fall victim to a conflict of interest.

A broker can sell his or her clients a wide variety of products and services that will bring the broker a wide range of fees and commissions, from high to low. As a general rule, the more income a broker earns from selling a particular investment, the weaker the match between the investment and the interests of the client.

Take the time to learn about stocks and trading and you’ll no longer look for market patterns that may or may not repeat themselves

If you’re using stock trading patterns and technical analysis to try and time the market, you’re destined for failure.

For centuries, people have been looking for recurring stock trading patterns that they can use to gain an advantage over other investors. Many try to link stock-price trends and turning points to months or dates on the calendar. Others look to events outside the market for guidance. They create rules and indicators that seem to have “worked” in the past.

When you evaluate these patterns and rules, you have to keep one key fact in mind: random events often occur in bunches. When you flip a coin, any heads-tails pattern of any length can repeat any number of times. The string of repeating patterns can end abruptly, or taper off over time. But eventually, over long periods, heads will come up about as often as tails.

Joining an investment club as you learn about stocks and trading has pros and cons

You may learn quite a bit about investing in an investment club, but keep in mind that some of what you learn may be things you should avoid in future.

If you’re relatively new to investing and want to learn more about how to trade stocks, joining an investment club could be a useful initiative.

Be aware, however, that there are both benefits and drawbacks.

Investment clubs can offer social and educational benefits. They can be a good place to learn about trading stocks if you think that you would feel more comfortable learning about investments with others. And some clubs let you invest as little as, say, $50 a month.

But investment clubs also have hidden risks that can hurt your profits. That’s because they make decisions by committee, where responsibility for mistakes is diffused. When committees make mistakes, they sometimes make big ones.

In addition, investment clubs can produce unexpected personality clashes and unfortunate peer pressures. What’s more, decisions formed by group consensus sometimes take on an air of legitimacy and urgency that can ultimately cost members a great deal of money.

Our investment advice: Look for an investment club that follows a reduced-risk, conservative strategy like ours.

Use our three-part Successful Investor approach to make the best stock picks for your portfolio

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight.

What are the most impactful things you have used to learn about trading stocks?

What types of controversial investment systems,, or strategies, have you encountered during your investing career?

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