Tuesday, January 17, 2012

How to Ride the Wave - Investing in the Stock Markets

Investing in the stock markets of the world is one of the most important things all individual investors should learn.

Buying a stock is actually buying a piece of an active business venture. You will share in the profits of that business and will receive monthly or quarterly payments directly to your account. To receive these payments you do absolutely nothing except invest in the shares.

Income producing stocks are truly the best way for the average person to multiply their income streams with very little time involved.

                                                              How the Markets Work

Stock markets are where shares of businesses are bought and sold. The value of these shares change constantly based on how much individual investors are willing to pay. There are many factors that determine the price of shares. Some are technical in nature while others are purely psychological.

Many fear stock market investing because they don't want to lose their investment. Many get greedy and want to make big gains on the price swings. The fear and the greed are two of the biggest factors in the fluctuation of stock share prices. When more investors are afraid of the market, prices go down. When more investors are greedy, prices go up.

                                                                How to Ride the Wave

Invest for the income you will receive from the businesses. Do not be overly concerned about the ups and downs of the market. You will not lose any money on your investment unless you sell it for less than you bought it for. Invest for the long term in solid businesses that are earning good returns for their shareholders.

You can enhance your gains by adding to your investments when prices are lower. If you must sell your shares, try to avoid selling in the low times in the investment cycle. Above all, do not panic. Money you need for everyday living expenses should never be invested in the stock markets. Spend the income, not the capital

                                                                Calm the Waters

The longer the time frame, the smoother the ride. The ups and downs of the market cycles will pass and you will be focusing on the continuously rising level of income from your investments.

The key to stock market investing is to choose good quality businesses that pay good dividends and keep them for a very long time. You should review these businesses periodically to ensure they are still profitable.
After all, you are part owner and should keep on top of what your businesses are doing.

By following the above rules, you should be able to have a very positive and rewarding experience from the stock markets of the world. Use them to build your wealth and multiply your income streams.

As always, I welcome your comments and suggestions for future topics.

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