The most common question I get goes something like this: How much money can I make buying and selling stocks?
You can substitute any individual stock in that question as well. In case you don’t know the answer, how much money you can make or lose buying stocks depends on 1) what stock(s) you buy, 2) what price you pay, 3) how many shares you buy, and 4) how much the stock(s) you buy go up or down during the time you own them.
If you can’t understand my answer then you are in trouble. I think it is safe to say that anyone asking such a question understands absolutely zero about the stock market should NOT even think about buying stocks until they learn what it is all about.
Unfortunately with the way the media portrays investing in stocks, beginners often come away believing that frequent trading is the best (and only?) way to make money in the market. From watching CNBC and other financial networks, novice investors might deduce that the correct way to “play” the market is to keep your money moving in and out constantly. But it isn't.
Buying and holding for more than a year not only reduces your tax rate on any gains you may have, it also prevents you from making knee jerk reactions and selling a stock whenever any bad news is announced. There are always instances when something good or bad happens to the companies whose stocks you own. You just simply can't expect to make money by trading individual stocks every time that happens.
For most investors, simply buying an ETF (Exchange Traded Fund) that mirrors the market is probably the best way to put their money to work. Bought and sold just like a stock, ETFs are easily traded and you can find a good summary of some of the main ones here. If you have money to invest, you might consider putting some of it into one or more of those ETFs every month. Buying consistently whether the market goes up or down insures that you have your money in at an average price that isn't too high. And keeping your money in those ETFs over a long period will be a winning strategy as long as the overall market goes up.
Buying and holding for more than a year not only reduces your tax rate on any gains you may have, it also prevents you from making knee jerk reactions and selling a stock whenever any bad news is announced. There are always instances when something good or bad happens to the companies whose stocks you own. You just simply can't expect to make money by trading individual stocks every time that happens.
For most investors, simply buying an ETF (Exchange Traded Fund) that mirrors the market is probably the best way to put their money to work. Bought and sold just like a stock, ETFs are easily traded and you can find a good summary of some of the main ones here. If you have money to invest, you might consider putting some of it into one or more of those ETFs every month. Buying consistently whether the market goes up or down insures that you have your money in at an average price that isn't too high. And keeping your money in those ETFs over a long period will be a winning strategy as long as the overall market goes up.
