Investing in the Stock Market
I started trading in the stock market in November 2012 with about $1500. Since then I have gradually increased my investment. There are several "rules" I have adopted over the years by learning, the hard way, and still learning:
1 - Don't expect to get rich quick. This is a waiting and watching game.
2 - Put only the amount of money in the stock market that you are willing to lose.
3 - Don't put all of your money into any ONE thing (eggs in one basket). Spread it in to several kinds of "vehicles" (bank savings, IRA, 401k, Money Market, CDs, Stock Market, etc.)
4 - Diversify in the kinds of stocks (metals, energy, telecommunications, etc.) you invest in.
5 - Don't follow the usual knee-jerk reactions of the masses to sell when stock pricing takes a dive (a normal thing stocks do).
6 - Find, and follow, the advice of an experienced trader. Research what Warren Buffet is doing. I subscribe to, and follow most of the stock portfolio of, Sean Hyman's Ultimate Wealth Report. I receive weekly portfolio video updates, monthly newsletters, buy/sell stock alerts within their portfolio and access to all of their archived documents. I believe I paid $90 for a 1-year subscription. Be wary of classes offered to help you become a stock market guru and make tons of money. Research all claims.
7 - Trade online through a reputable Broker (Etrade, ScotTrade, TD Ameritrade, etc.) with a trade fee of no more than $6.95 per trade. Keep in mind that when you sell a stock, consider these fees that you must pay to buy and sell to determine your profit margin.
8 - Buy stocks of reputable companies with a good financial history.
9 - Buy stocks that pay quarterly dividends of 3% or more annually. This usually provides a source of income regardless of the stock price fluxuation. If you don't want to cash-out the dividends, roll them over to buy more of the same stock (check with your broker for doing this).
10 - BUY when stock prices are low and SELL when your stock prices make you money (including the trade fees you paid).
I am not going to say that I'm the best trader and, certainly I'm not becoming a millionaire, but my financial returns are better than the current best bank savings accounts APR.
Taxes: Yes, Uncle Sam needs his cut so you have to pay taxes on your stock earnings. This is usually handled at tax time when your broker issues you a 1099-DIV Form. This is best handled if your broker works with your tax software to download the 1099 directly into your software, otherwise it can be a bit of a pain to manually add it to your tax return.
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