Investing In The Stock Market

Had you invested in real estate over the past 30
years or so, you would have done very well.However, prices have now reached such a level
that it may not be such a good investment especially in the short-term. Over the long-term,
prices are sure to appreciate once again. Outside of bricks and mortar, the stock market still
provides the skilled individual with one of the best opportunities for a rise in capital.

With the globalization of markets now accomplished enabling an individual to trade in almost any market across the globe from anywhere, we will concentrate on the American market, which is still the biggest and most liquid market. Having decided to concentrate on the American
market, you now must decide on what sort of companies offer the best opportunities for making
a profit.Small technology or biotechnology companies can sometimes offer spectacular gains in
the short-term. However, your chance of picking them out of the bunch in advance of the
significant move in their share price, unless you are equipped with insider knowledge,
is pretty slim. Therefore concentrating on large established companies is a much safer route
to profits.Concentrating on the constituent members of the S&P 500 index provides the
investor with ample scope for investment in established companies. It is therefore best to concentrate your attention on the latter to provide the necessary fodder.

When viewing companies in an index such as the S&P 500, you have got to be aware of the
different sectors within it. In order to reduce your risk, it is inadvisable to invest in
more than one company in any one sector at a given time. Picking on a sector that is
currently advancing, or about to advance, and then looking for the most eligible company
within that sector likely to profit from the favorable tide can be very rewarding. The
company chosen need not be the market leader in that particular sector. If Xxon Mobil, for
instance, dominates the Oil and Gas sector, a second or third line company in that sector, such
as Occidental Petroleum, may give you a much better opportunity to profit from rising
oil prices for example.

Ideally, you are looking for an established company in a sector that is advancing, or likely
to advance, that is paying increasing dividends from rising profits, and with a p/e ratio
( that is payment/earnings) less onerous than it's peers.P/e ratios are only relevant when
comparing companies within the same sector. Another approach to picking a company whose share
price is likely to advance, is to pick a large company with good prospects when it is
temporarily out of favor with the market. Both AIG Group and Pfizer have been in the doghouse
over the last couple of years enabling astute investors to profit from their short-term
unpopularity.With this strategy, timing is of crucial importance.

If you segregate ,say, $20,000 as starting capital for investment purposes from other funds
required to live from month to month, the best place to initially put it is into a high-
interest bank account until such time as you are ready to invest. This account should pay
4% or better interest per year.You would then limit your investment in any one share to
15% of the total, or $3,000 including dealing expenses per investment. It is inadvisable,
especially in jittery markets, to have more than 70% of the total invested at any one time.
The market has moods and when everything looks black on the horizon, good shares will fall
back with the bad and the ugly ones giving you a chance to buy a good share at cheap prices
for recovery.

If you do your own research, it is best to use an execution- only broker who are cheaper
than those offering investment advice. Pick a large broker with many years service in the
market. If you want a broker offering investment advice, go for one who has a proven record
of offering impartial advice in the market as recommended by a friend or acquaintance