There Are People Out There Who Play The Stock Market Like They Play The Lottery

Category: Finance.

Investment strategies for the long term are a vital to our future.

Nobody likes the idea of having to work for the rest of their life, and we have put together a list of do s and don ts to secure a comfortable retirement. How you invest now may be the difference between a comfortable retirement, and working for the rest of your life. Tip# 1 Educate yourself. This is very dangerous, gambling on the stock market is the equivalent of going to Las Vegas and putting your life savings on the line. There are people out there who play the stock market like they play the lottery. With any investment that is going to provide a decent return, there is risk. The general rule of thumb is, the higher the risk, the higher the return on your investment, the lower the, and likewise risk, the lower your return.

How much risk you take on with any investment directly affects the return. The risk of investing into just a savings account has been explained. This includes finding out what common terms are and what they mean. While investing in stock is riskier, educating yourself can reduce the amount of risk you take on. Understanding the financial statements of the company you want to invest in, and understanding the market that you are investing in. This step is just as important as the first, having the education is useless without having some kind of direction.

Tip# 2 Devise a plan. Decide where you want to be by the time you retire, where you want to be when you hit fifty. You will also need to decide what kind of retirement you want to have. Evaluate where you are now and what you want to accomplish in the next year, you can never plan too much. Do you want to maintain the quality of life you have now? Filthy rich? Do you want to retire rich?

Or do you want enough to just get you by every month? Tip# 3 Investing is vital to your retirement. Realize what you want to do and devise a plan. This cannot be stressed enough. Nowadays you have companies cooking the accounting books, and executives being the only ones with guaranteed pensions, and CEO s abandoning their companies leaving their employees with nothing while they take their guaranteed multi- million dollar pensions home. It used to be that you worked for a company for 30 years until you retire, you get your office party and the faux gold watch, but you had a pension and social security waiting for you afterwards.

What does this mean? Nothing is guaranteed any more, not even social security. It means that the person with your best interest is you. Corporations are replacing pensions with 401k plans, in essence they are shifting the responsibility for your retirement from them to you. Realize that if you decide not to invest at all, you are throwing you future away. It is up to you to decide whether you want to invest in your future. Tip# 4 Research Research Research.

Whether its real estate, whatever, stock, you should never invest off of an assumption. There are so many reasons that you need to research whatever investment vehicle you choose. Most investors refer to this as due diligence. They ll tell you to buy some shares of so and so stock because they are guaranteed to give you phenomenal returns. First and foremost, never invest off of a" tip. " There is always someone out there that knows what the next big investment is. While the advice may have some truth, it is best to do a little research first before putting any money into it. In general, if a company has more costs than it does revenue, this means the company is not turning a profit.

When doing research, it helps to understand financial statements. In 2000, Amazon. com( NASDAQ: AMZN) was selling its shares at$ 1100 per share, all while never having turned a real profit since the company started. Imagine if someone invested their entire life savings into Amazon s stock at this time, they would have less than half of what they saved left. Today Amazon s stock can be bought for$ 45 a share. This is the reason for the most recent stock market crash, investors were buying shares from companies that could not show a profit. Another reason for the recent stock market crash is because a lot of investors invest with emotion rather than knowledge.

Companies were having lavish office parties every week because their stock was flying through the roof, all while their product sales could not fund these expenses. Over the holidays investors feared another terrorist attack, so they sold shares fearing another attack would drive the stock market back down. And that fear is detrimental to the stock market. The emotion was fear. If enough investors get scared and begin to sell their shares, the market will surely drop. Tip# 5 Inflation. If more investors are buying than selling, the stock market will rise.

The final tip is also a part of research, understanding inflation. The Webster s dictionary defines inflation as: an increase in the volume of money and credit relative to available goods and services resulting in a continuing rise in the general price level. It is important to know that as it pertains to your future, inflation is not good. In other words, as time goes on, prices rise. If it would take$ 2 million to retire today, find out what$ 2 million will be by the time you retire, otherwise you will be selling yourself short. A good example of inflation, is how a million dollars today, isn t what it was 20 years ago, and it wont be what it is 20 years for now.