Posted by: The Soaring Eagle | March 29, 2012

How to Invest?


Investment is based on rules and guidelines, as well as inclinations and gut feelings. If you could find a wounderfel business at an attractive price, following the strategies we’ve talked about in the previous posts, do not ignore your feeling towards the company!

If, for any reason, you didn’t like what the company produced, or you wouldn’t feel proud had you have to own the whole business for the next 20 years or so, do not buy. As simple as that. There’re thousands of businesses out there to choose from.

On the other hand, don’t ever let your love for the business stand between you and selling your shares (or part of them) once the business stops being wonderful, or once you realize it’s time to cash in your profits.

Investment in stocks is only one kind of growing your capital. There are other investment instruments, but you need to choose something that suits your risk tolerance and the length of time you afford to leave your capital in an investment (assuming you can’t withdraw any proceeds during the investment term).

I’ve talked about HYIP investment, and given several warnings in case you would like to “try your luck” at such investment instrument. Since that post, I’ve found two or three sites that could be safer than the majority of HYIP’s. The main reasons are they have been around for a long time, and they have been paying their members on time. But that does not eliminate the risk entirely.

Now let’s delve into our main topic. In order to invest in any market, you will need a broker to carry on the actual buy and sell activities on the  “floor”. The floor is a term used by brokers to refer to the operation space of a stock exchange. Examples of stock exchanges are: New Your Stock Exchange (NYSE), Toronto Stock Exchange (TSX), NASDAQ, and many others. Almost every major city in the world has its own stock exchange. A stock exchange (SE) is where brokers “change hands”, in other words: Buy and Sell on behalf of their clients.

In the old days, people had to interact directly with their stock brokers in order to “place orders”. Placing an order is another term that means asking the broker to execute a Buy or Sell transaction in the SE, on your behalf. So if you wanted to buy 100 shares of IBM back in the fifty’s or sixties, you would first call the broker, identify yourself, ask for the operation you wanted, and then wait for him or her to call you back (usually after few days), to let you know if your order had been “filled” or not. A filled order is a successfully executed order. In our example it means: Your request to buy 100 IBM shares had been fulfilled. Then the broker would send you a certificate that proved your ownership of those 100 IBM shares.

It’s different nowadays. The whole scenario described above has been minimized to a few mouse clicks, and sometimes, to a few seconds (if the market is open).

In the following post, I’ll exaplain the deatals of today’s stock investment steps (I’m assuming here that you’ve already done your homework and picked the right business, based on the criteria explained at length in the previous posts). Now since we’ve picked a wonderful business at an attractive price, we need to know how to buy shares in that business, and how to sell those shares (or part of them), if need be.

Till the next post, stay safe, and happy investing!

Yaman

The Wealth Maker

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Responses

  1. Indeed. Understood.


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