Deciding to invest your hard earned money in the stock market is an important step. The market offers investors the opportunity to grow and preserve capital at a rate unmatched by banks, bonds, or CDs. The catch is that there is the very real risk of losing money, including loss of principal.
If you understand the risks then your next step is to ask your self, “what stocks should I invest in?”. There is no shortage of advice on the matter, with thousands of print and online publications, as well as social media offering the latest stock tip, or “sure” thing.
Before committing any capital, you must first analyze your personal investment style. Look truthfully at how you feel about volatility, losing of money and believe it or not, how you feel about realizing gains. You can sabotage your goals if you do not know when to sell your winning shares just the same as if you do not know when to dump losers.
What Stocks Should I Invest In To Buy-And-Hold?
If you are the loyal stock owner you are not alone. Super-star investor Warren Buffet has said that he would “never” sell his stake in the Washington Post. That is quite a statement, and a testament to one of the greatest buy-and-holders of all time.
The key to this strategy is to invest in blue chip companies such as General Electric (GE), IBM (IBM), and Ford (F) that are the cornerstones of a long-term investment strategy. By using dollar cost averaging, reinvesting your dividends, and holding these securities for a long time, your buy-and-hold portfolio will slowly build wealth as well as preserve capital well into the future.
While they will never make a Hollywood blockbuster out of the buy-and-hold investing strategy, for the more cautious investor, particularly if the investments are earmarked for retirement or education, this remains the best avenue for steady profits and a good night’s sleep.
What Stocks Should I Invest In To Aggressively Grow Capital?
If the buy-and-hold strategy is too passive for you, or your investments are earmarked for a non-essential expense (a new car or vacation for example), the market provides plenty of opportunities to aggressively and quickly grow capital.
Momentum investing, commonly referred to as day trading, involves catching a stock on the way up, and riding the wave. The trick is to identify the top and sell at the right moment. Sell too early and you miss out on potential profits. Sell too late and you risk losing money. Momentum investing is not for the faint of heart, so make sure you have the personality for it before committing any capital to this style of investing.
Along with the opportunity to grow capital, when you invest in more volatile stocks, or penny stocks, there is the all too real possibility that you could lose money, including principle. The key to chasing momentum is to back up your picks with research.
While research is not in style with the day traders, it pays to know the fundamentals of a company, why it is growing, and it’s price history. Getting your hot stock tip from the guy at the deli, or a random person on Twitter and doing no additional research is a sure fire way to lose money.