Stock Market Advice

Stock Market Advice for Newbies

There are a lot of newbie investors that are very interested in stock market advice and tips. Now, while the right knowledge may give you a quick buck or two, it's usually a long shot. There is however, tried and tested stock market advice that even seasoned investors follow. Keep in mind though, tips are useless for long-term investments.

You can't predict the market. Literally millions of people have tried to do this since the first IPO, but everyone has failed. While you can predict some trends, you can never tell exactly what the market is going to do. And don't believe anyone that says he can – he just wants your money.

Remember to factor taxes into your expenses. You do pay a small amount for documentary stamp tax when you first invest, but where the government gets a real chunk of your change is when you sell the stocks. But, if you hold onto the stocks for more than a year, you are charged less for your taxes since it will be considered long term capital gains rate. Stocks that are held for less than a year are slapped with the ordinary income tax rate, which can be up to twice the long term rate - logical stock market advice.

Another piece of stock market advice is to average out the costs of your investments. Make a schedule when to buy your stocks, like for each paycheck, or for every season. That way, the prices of your investments are always at the average price and not affected by market idiosyncrasies. This could be the best stock market advice you'll ever find.

A highly underused goldmine is your 401(k) plan. This plan seems to be clothed with hype, with claims like

free money from your employer, lower taxable income, easy savings and earnings, and a simple retirement fund. Surprisingly, these claims are true, since any investments that you make are not charged your income tax, and many employers offer a matching investment of up to 100% of what you put in. This is actually a simple way to set aside money for an early retirement or just to build up your savings. It's worth the extra trouble to do more research on this area.

The old edict of not putting your eggs in one basket is truly applicable here as stock market advice. Spread out your investments into long-term, medium term, and high-risk investments. Keep the bulk of your investment in long-term (between five to ten years) blue chip stocks, then spread out the rest in stocks you find interesting or have a "gut feel" for in medium term (between two to five years) investments, and the unsecured stocks with no guarantees but a promise for high returns as your high-risk investments that you may turn over in a year or less, or even lose money on. A rule of thumb is to put the money you want to keep in your blue chips and throw the money you can afford to lose in your high-risk investments. That way you can earn a little extra but not bankrupt yourself in case something goes wrong.