The key to making money in the stock market is to invest in the long term, buying only undervalued stocks quote Benjamin Graham, the "safety margin". Ben Graham and Warren Buffett both made enormous fortunes by investing in long-term value. In fact, Buffett will continue to do so, and is averaging more than 22% average annual growth rate combined with a period 39 years.
These results are phenomenal and not easy to imitate. However, the time on its side and a bit of work can be done almost as well as Buffett. Although you may not be the S & P 500 average return over the long term, approximately 11%, you're well.
Suppose that invests $ 3,000 in Roth IRA or other tax status of pension account each year and 20 this year to reach average annual profit is 11% During this season. At the end of 20 years you would have about $ 238,000 without taking into account transaction costs and dividends. You only invested $ 60,000 - so $ 178,000 is generated entirely through compound interest. If you were to emulate Buffett's 22%, that $ 60k should be $ 1,031,000. If you want to start earlier and invest $ 3,000 per year for 40 years by 11%, you end up with $ 2,132,483. Match Buffett 22% of these investments over 40 years and you end up with a whopping $ 55 million investment $ 120,000! It is the power of compound interest.
Many people ask me: "What steps can I buy?" and "How do I start?" They will continue to invent excuses for not investing in the long term. My opinion is a bit of publicity as Nike: just do it! Before you start. Open a Roth IRA to start putting money on a regular basis, even though it's only $ 25 a month. It is important to take the regular way of saving. In the meantime, you can take care to buy stocks.
Picking stocks to buy is not very difficult. It should not be a lot of work. There are many places where you can search for investment ideas: in fact there are hundreds of investment websites, including investors, Graham, in which we tend to profile stocks that appear on the screen based on the value and give an opinion as to why an individual may be worthy to follow - not necessarily buy .
There are many different strategies to make a typical primary screen stocks that meet a specific criterion value could be one of: low PEG, high intrinsic value compared to current prices, the prices of less than two thirds Graham number. When we have a list of securities meet the basic criteria you can filter the bad cash-flow rates, excessive debt, poor performance, projected or irrelevant. We also avoid low liquidity of stocks is to ensure an average daily volume is as high as possible, and low stock prices (typically steering clear of stocks trading below $ 3).
When you are satisfied in addition, maps for each stock. Find recent clear downtrend or new 52-week low. Put the stock downward trend most obvious is to watch list. Especially those showing the downward trend which is also reflected in decline. Look at the news of these stocks to see if there is obvious cause of their poor recent performance. Do not buy - they could get more. We do not try to catch the bottom, it is a sure way to lose money. What we are witnessing is a clear sign of translation and buy the stock moves up. Often, the translation can be done slowly and almost imperceptibly, at other times may be a sharp change in direction. In most cases, it is somewhere between. Maybe the stock is battered investors view as an overreaction to bad news. At some point, the bad news may have been eliminated or shown to be unfounded and the stock begins to return to their fair value. However, good news can come and turn the stock investor's vision comes in. usually when this happens, we want a downtrend broken convincingly higher volumes and prices.
How do we know if the downtrend is broken? Just pull the line peaks of diminishing, and coach is expected to rise to a large amount of sulfur. What number? It depends. A greater number of better. See at least 150% of average daily volume.
Once you have purchased a set a stop loss of about 80-10% lower if you have purchased. If possible, place the stop loss orders below the lowest low before the takeover, because it is not too far from your writing. Spread the risk and help to minimize losses. Share your own capital is at least 10 batches, if deposited only $ 5,000 to buy $ 500 worth of each position and keep stop loss of 10% on this, or $ 50. If the logical stop loss point is too far from your possible entry point, do not invest. To follow the rules and cut losses. Let profits run. In the long term, you can do so much more winners than losers lose - you can have 5 losers, and further down to only $ 250 or 5% of the equity.
Buy undervalued stocks are good arguments in this way, or close to the bad side, when no one else was interested for some time, but there are signs of a reversal is probably one of the techniques investments less risky, because the construction of a "safety margin".
(C) 2005 Graham Investor - Value Investing You can use this article because it was that this copyright remains intact.
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