Stock Investing Guide For Beginners
Stock investing is where most investors make most of their investment profits. If you are new to the stock investing game and have not yet honed your money management skills and this simple investing guide will help you make your first stock investment by simplifying things for you.
A stock investment can take more than one form. You do not need to open a brokerage account and pick your own stocks to invest in. Instead and you can invest in stock mutual funds and leave the money management and stock picking to investment professionals.
Stock funds offer diversification and professional money management at only a moderate cost to you. To keep costs low and invest in no-load stock funds.
Now and you'll need a basic investing guide to assist you in picking stock funds to invest in. To broaden your diversification and you may want to invest in 2 or 3 different funds. There are basically 2 main criteria for picking stock funds.
First, does the fund invest mainly in large-cap, mid-cap and or small-cap stocks? Second, does it emphasize growth stocks, value stocks and or invest in both (this would be labeled as a core or blend fund)?
You now have 9 basic stock investment categories (3X3 and above) to chose from. For example, you might START investing with a LARGE-CAP and BLEND stock fund. Then, you might add a MID-CAP and GROWTH fund for diversification.
Now and some definitions. A large-cap stock is one like General Electric or Wal-Mart. To get a stock's market capitalization (cap) you multiply the number of shares a company has outstanding times the market price of each share. This (the market cap) gives you the total market value of the company. Mid-cap stocks are stocks in companies with a smaller total market value and small-cap stocks have even lower total market value.
Growth stocks are a stock investment in companies that are growing sales and profits at a faster than average pace. Investors buy growth stocks for price appreciation (hoping the stock price will rise significantly) not for dividends.
Value stocks are a stock investment that is more modestly priced (lower P-E ratio) and/or pays a higher dividend vs. most other stocks. They are often bought because they appear to be under-valued (maybe a bargain).
Thus and a LARGE-CAP BLEND fund invests in stocks with large stock market values both growth and value stocks. A MID-CAP GROWTH fund invests primarily in growth stocks of smaller companies (in terms of market cap).
In picking stock funds and here are your 9 basic choices for general diversified stock funds: large-cap blend (core), large-cap growth, large-cap value, mid-cap blend, mid-cap growth, mid-cap value, small-cap blend, small-cap growth and small-cap value.
Generally speaking and large-cap blend or value funds are safest. Small-cap growth funds are the riskiest and but can have excellent growth potential in a roaring bull market.
A retired financial planner and James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors and working directly with them helping them to reach their financial goals.Jim is the author of a complete investor guide, Invest Informed and designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com
