How To Invest
In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.
If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)
If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.
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Buying and selling stock options is different from regular stock transactions. You can make money in options investing, of course, but to be successful in this complex, often risky area, it’s crucial to have a firm grasp of how options investing works (and how to avoid the pitfalls that can expose you to serious risk).
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How options investing works
An option is a contract between a buyer and a seller that is based on an underlying security, usually a stock. The buyer pays the seller a fee, or premium, for certain rights to the stock. In exchange for the premium, the seller assumes certain obligations....
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Whether you’re a beginning or experienced investor, it’s always a good idea to review the fundamental points of successful investing. That’s what we give you in our new “Investor Toolkit” series. Every Wednesday, we’ll give you a new fundamental easy investing tip and show you how you can put it into practice right away. We hope you enjoy and profit from it. Today’s tip: “Sound investor habits and attitudes are as important as good investments.”
To succeed as an investor, you need to cultivate three personal mental strengths:...
To succeed as an investor, you need to cultivate three personal mental strengths:...