How To Invest In Stocks

When I say How To Invest In Stocks in this article, I'm referring to long term investing as opposed to shorter term stock trading, which is what most of Online Stock Trading Guide is about.

When I first started investing back in the early 1990's, I was drawn towards the mentality of handing my money over to large firms such as A.G. Edwards and later Merrill Lynch, and selecting Mutual Funds as my investments.

To this day, many people choose to do the same thing, only over the last 10 years or so (since the tech crash of 1999-2000) many people have also lost their faith in having a hands off approach and using only Mutual Funds as their investment of choice. The trust and faith in these methods have declined dramatically.

Since 1999-2000, I've seen many long term investing methods that have appeared to work well, and many that have not worked so well. I'll go over a few methods I've seen below and my opinions of how well they have worked:

  • Mutual Funds: I think that portfolios consisting primarily of Mutual Funds which basically manage your money for you, have been a rollercoaster ride since 2000. I personally don't like the hands off approach and many mutual funds are in the same place they were 10 years ago.
  • Mutual Funds with a touch of personal hands on management: By this I mean investing in select Mutual Funds but also taking a semi-hands on approach by reviewing your portfolio annually, and making adjustments out of existing and into other Mutual Funds if neccessary. I've seen people who do this and have had great results, much better than a complete hands off approach using Mutual Funds.
  • Individual stock selection: I've seen many people who select their own stocks for long term investing and have done extremely well over the years. This takes a strong will because once you get started with a hands on approach, you'll have to learn how to have good discipline as well. The people I've seen with the most success are extremely bright, disciplined individuals. The one downfall to this approach is that I've noticed many of these people never sell their positions. This may be good when investing over 20, 30 or 40 or more years, but a plan needs to be in place to exit positions at some point, if any profits are to be realized. A stock that was once $100 a share can indeed go to zero if you don't pay attention.
  • "Options-Enhanced Dividend-Focused Value Investing" (I borrowed this terminology): Out of my almost 20 year's of investing and stock trading, this method of how to invest in stocks is by far the most fascinating that I've come across, and has one of the greatest, low risk potential for profitable returns over the long term. You can find out more details on my Long Term Investing page where I've previoulsy written a review on this approach. Some of the greatest returns I've seen people have over the years have been from single stocks. Using this type of approach mentioned here, single stocks are selected from great companies with: manageable debt, dividends to reward shareholders, increasing dividends over time, and profits/income enhanced by using option strategies. Option strategies may be foreign to some stock traders, but they don't have to be. The page on my site about Long Term Investing provides more details and a link to a downloadable ebook offer which explains exactly how this strategy can be put to use, and for a one time cost of less than $40.00.

These methods on how to invest in stocks are some of the methods that I've seen used over the years that I feel are worth mentioning here. There can be other approaches on how to invest in stocks that will help produce profitable results over the long term so keep these in mind as a sample based on my opinion only. If I have the chance to teach my children any one single method, it would without a doubt be the last one I mentioned, "Options-Enhanced Dividend-Focused Value Investing".




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