Wednesday, December 13, 2006

Don’t just go for fast rising stocks

When people think or ask about investing in the stock market, they often want to know which share will go up the fastest. Inevitably that can be difficult to predict, even though on a few occasions you may actually hit the right share to make a killing.
The first problem with buying the share that will go up fastest is that you may not necessarily pick up the share that will go up the most, and that is a better aim when investing. The second problem with volatile shares is that they are very risky, so you could make a good and fast buck on your first five investments, but then end up burning your fingers on the sixth share and that loss would in all wipe out the profits from the quick risers.
The better approach when investing would be to look at the broader picture and base most of your investments on companies with good management that are progressively growing in profits and profit distribution. Then, with the remaining cash, you can decide to speculate on the quick movers and enjoy some ongoing profits where you make the right move.
Never use money that you will require for essentials such as food, or shelter, or school fees. In the event that your investment does not perform well, you do not want to be stuck with less than you can afford to live on.
There are a few glory tales about people who have earned from the stock market to pay school fees, but those are the exceptions and perhaps those who have nothing to lose because the amount of money they started with was too little to finance their daily livelihoods anyway.

1 comment:

Emerging Africa Capital said...

If you've been in the market for a good period of time, Im sure youve noticed the inefficiencies. My rule has always been, ...hang around the people who really make it happen whether the stock is rising or not, we always strike it right by listening and acting.