It is true that fortunes are made in the stock market, however there are also stories of people losing a large amount of their money.
To help you sleep better and avoid losses, I offer the following five tips: 1) Investing in stocks is a roller coaster ride.
Don't jump in unless you can sleep at night with big swings in your portfolio.
We have currently seen this during the ride of Oct '07 to March '08 and once again in June and July '08.
The biggest advantage of online stock investing is the huge profits that are made when the market goes up.
However this is also conversely true because huge losses can also be made when the market goes down.
2)Long term or short term? - You should determine what type of investor you are.
This question is very important and should be asked by every serious beginner investing.
Long term investors hold their stocks for 1 year or more.
The advantages of long term investing is that you do not have to worry about the day to day burden of technical analysis that has to be monitored.
There is no problem if the stock is held for a long period of time because long term investors believe in the fundamentals of the company.
I prefer to invest short term as I have the time to watch and monitor my stocks.
Look what would have happened to you if you invested in Enron or Worldcom long term.
You would have lost everything.
Both stocks flashed warning signs of doom and it was easy to get out before they collapsed.
The only one's who lost on those were long term investors.
Another advantage of short term is the ability to make a quick profit, get out when things go bad, and reinvest in better prospects.
This allows investors to compound their money faster.
3) Online stock buying does not require you to have millions or hundreds of thousands of dollars.
You can start with as little as $3,000 US but I would highly recommend $10,000 minimum.
Commissions from buying and selling will eat up a lot if you have a small bankroll.
Also you can't always be right and you need money to weather the storm.
If you have a small bankroll, wait to do any online stock buying until the markets are in a rally.
4) This brings me to my next point.
You must learn to minimize your losses and maximize your profits.
If you lose 8% on a stock, you only need to make 9% back on the next one to break even.
A 9% profit is easy to do.
On the other hand, if you lose 50% on a stock, you need to make 100% on the next one to be even.
Making a 100% is not easy.
5) The stock market is not a get rich quick scheme.
Always remember, money takes time to grow.
Those investments that give you a high rate of return in a very short period come with a high degree of risk.
Always strive to achieve high returns with minimal risk.
Combine that with short-term investing and compounding, can produce some nice returns over the course of five years or so.
If you are like the average person you have probably been working for more than five years, and probably still don't have much to show for it.
Working only allows you to obtain the money to invest.
It is those investments, that over time, will make you wealthy.