Investing in the Share Market - EVERYONE'S Option
The listings of available shares can be found on the Internet and in the business section of most National and State newspapers. It is a bit like the form-guide for a race meeting. With this as a shopping catalogue, you can pick those sectors the earlier research and your broker seem to indicate as the safer options. Within these - mining, industrials, financials, etc. - are the individually listed companies, each with their own prices for buying and selling, plus the increase or decrease driven by the number of shares which have changed hands during the last trading period, usually a day. Not all will be within your limited price range, but of the ones that are, quite a few will seem to have gone to sleep. As this is all about profit, it might be better to look at those which have experienced a bit of movement. It must be remembered, however, that you are only looking at one day's trading. So, pick a few likely candidates, including some of the sleepers, then go back to the research to find out how they've been fluctuating over the past months. I realise how tedious this might sound - forever checking, then checking again - but the only alternative is to rely on the advice of someone else who won't be accountable for any losses you might make.
Research done, the picture of how your possibles have been fairing should be clearer. You may even have produced something approaching a short-list. If the nerves are starting to play up a little, that's good - you are still aware of the possible dangers. Let's see how you cope with the next stage. This is where you discover if you should get into share trading at all, or just stick with the weekly lottery. If you haven't already made a short list, do it now, then make the final selection of those to be included in the portfolio. It will be noticed that some companies have more than one listing. I used to forget about options, etc., and stuck with ordinary shares, mainly because they were shorter term considerations and there was less to think about. Depending on the price of each share, there may be a minimum that you can buy at any one time. The lower priced ones, $1 to $2, might have to be purchased in blocks of 100, even 500 or 1000 for those less than a dollar. Your broker will know the score on this matter. Now it is simply a matter of picking the ones to buy and calculating how many of each.
The choice won't be a random affair, but will be made based on how diligent you intend to be with regard to monitoring the progress of the portfolio. Unless you can risk buying a large amount of a particular share and are prepared to watch its movement like a hawk, there is little point having one which, according to your research, moves up and down a percent or two most days, yet is the same price now that it was six months ago. What you need are those which rise and fall in a similar way on a daily basis, but that have a record of increasing gradually over a longer period. With a few of these, you won't be buying and selling in a panic.
You've studied the form, have picked your runners; and the prices, including brokerage, suit the budget. Now you must imagine you have your broker on the line and are passing on instructions to buy the shares of your choice. What must be remembered here is that the share market works in a similar way to race-track betting. Starting prices are driven by demand and fluctuate according to current bets, or in this case bids. If you simply request the purchase of 200 XXXX Fabrications Inc shares, the broker will buy at the best price, but it might have risen in the meantime beyond what you are prepared to pay. You need to provide some reasonable guidelines for your broker to buy 200 XXXX Fabrications Inc shares at no more than say: $3.50. In reality, this proviso could delay the purchase by hours, or even days, depending on the flexibility of your offer, but it is the safer way.
This procedure will eventually be repeated with all of the shares you have chosen to buy. I say "eventually" because, adopting the 'buy low, sell high' principle, it may be better to build the portfolio over a period than all at once. As soon as you have given your pretend broker the go-ahead to buy, even if only one company, you now have to check the prices of your selections over the next few days to ascertain if you were flexible enough and have managed to secure all the shares in your portfolio. With a lot of thought and a bit of luck, you are off and running.
The next step is the fun part and is certainly less harrowing than the selection and buying process. Over the coming weeks, you'll be closely watching the performance of your shares to see if you've made good or bad choices. What you will be looking and hoping for is the time when the price of the shares reach that all-important break-even point. Bear in mind, this is not just how much they were when you bought them, nor even taking into account the initial cost plus brokerage. What must also be included is your broker's additional charge for selling. So, purchase price + brokerage(buy) + brokerage(sell) = break-even price. Anything over and above this figure has the potential to turn a profit, always assuming your broker manages to sell before the price drops again.
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