Blue-chip stocks are popular because they typically have a decades-long track record for earning. "Blue chips" derived their name from Poker, where the most valuable playing chip color is blue. Shareholders like them because they tend to grow dividend rates faster than the rate of inflation meaning the owner increases income without having to buy another share. Blue-chip stocks are not flashy, but they have solid balance sheets and steady returns.

Buy in thirds: Like dollar-cost averaging, “buying in thirds” helps you avoid the morale-crushing experience of bumpy results right out of the gate. Divide the amount you want to invest by three and then, as the name implies, pick three separate points to buy shares. These can be at regular intervals (e.g., monthly or quarterly) or based on performance or company events. For example, you might buy shares before a product is released and put the next third of your money into play if it’s a hit — or divert the remaining money elsewhere if it’s not.


When it comes to investing for long-term growth and putting your money to work, it is immensely important to understand your goals and the investment philosophy you will adhere to. It can be easy to lose sight of your targets amidst the noise on social media or news outlets surrounding the latest and greatest investment trends, but if you define your goals and investment strategy, you can stay on track.


But building a diversified portfolio of individual stocks takes a lot of time, patience and research. The alternative is a mutual fund, the aforementioned ETF or an index fund. These hold a basket of investments, so you’re automatically diversified. An S&P 500 ETF, for example, would aim to mirror the performance of the S&P 500 by investing in the 500 companies in that index.
Michael R. Lewis is a retired corporate executive and entrepreneur. During his 40+ year career, Lewis created and sold ten different companies ranging from oil exploration to healthcare software. He has also been a Registered Investment Adviser with the SEC, a Principal of one of the larger management consulting firms in the country, and a Senior Vice President of the largest not-for-profit health insurer in the United States. Mike's articles on personal investments, business management, and the economy are available on several online publications. He's a father and grandfather, who also writes non-fiction and biographical pieces about growing up in the plains of West Texas - including The Storm.

3. Get an education. Warren Buffett has suggested in the past that every investor should be able to understand basic accountancy principles, an annual report and stock market history. You probably do not need to become an accountant, but being able to understand the scoring system of the game can only help. There are thousands of books about investing and trading - you don't need to read them all, but you probably ought to read a few to enhance your theoretical knowledge.


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When thinking about a stock exchange it is worth remembering that it is a capital market. The primary purpose of a capital market is to enable businesses to raise money to provide working capital to fund expansion and growth. In exchange for this money, the companies issue equity in the form of stock, creating stockholders. Each stockholder ownes a piece of the active business relative to the amount of money they invested.
Payout ratio -- The payout ratio is a good metric for dividend investors to know and is the company's annual dividend rate expressed as a percentage of its earnings. For example, if a company paid out $1.00 in dividends per share last year and earned $2.00, it would have a 50% payout ratio. A payout ratio can tell you if a company's dividend is sustainable or if a dividend cut could be possible.
A stop-loss order is designed to limit losses on a position in a security. For long positions, a stop loss can be placed below a recent low, or for short positions, above a recent high. It can also be based on volatility. For example, if a stock price is moving about $0.05 a minute, then you may place a stop loss $0.15 away from your entry to give the price some space to fluctuate before it moves in your anticipated direction.
However, it might be best to not become too much of a market "expert". Some of the most famous and successful investors of all time, such as Peter Lynch, the famed manager of the huge Fidelity Magellan fund. He suggested that looking for clues in normal life is a great way to find opportunities. Lynch used to closely follow the shopping habits of his wife to see what brands people were buying. He believed that most people working professionally on the NYSE lived in a bubble.
Now, imagine that you decide to buy the stocks of those five companies with your $1,000. To do this, you will incur $50 in trading costs—assuming the fee is $10—which is equivalent to 5% of your $1,000. If you were to fully invest the $1,000, your account would be reduced to $950 after trading costs. This represents a 5% loss before your investments even have a chance to earn.
You might hear experienced investors talk about the concept of a "wide moat," especially if you're reading anything about Warren Buffett's investment style. Just as a wide moat around a castle makes it difficult for enemies to invade, a company should have a "wide moat," too: a sustainable competitive advantage that will prevent competitors from stealing that company's market share.

You can have the best strategy in the world, but if you can’t stay disciplined and keep your emotions in check, you risk losing profit. The first thing to note is that it’s human nature to show and react with emotion, especially when there’s money on the line. Fear, greed, and ambition are three of the most prevalent and potentially dangerous emotions. Fortunately, we have listed the top psychology tips to help you keep a level head.
Finding the best stocks to buy and watch starts with knowing what a big market winner looks like before it takes off. As noted above, IBD's study of the top-performing stocks in each market cycle since the 1880s has identified the seven telltale traits of market winners. Your goal is to find stocks that are displaying those same traits right now. Traits like explosive earnings and sales growth, a strong return on equity, a fast-growing and industry-leading product or service and strong demand among mutual fund managers.
Once you've decided that you want to buy stocks, the next step is to open a brokerage account, fund the account, and buy the shares. After you've done that, it's important to keep a long-term mentality -- if your stocks go down, for example, it can be very tempting to panic and sell. Remember how carefully you chose your stocks, and avoid selling your stocks without fully exploring the company's situation.
Understand the risks associated with the stocks you are investing in. In the company’s 10-K, there is an extensive section that talks about the company’s risks. You also need to understand your own tolerance for risk. If you invest in a stock that is highly volatile and you are not comfortable with market fluctuation, owning the investment will make you anxious and more likely to sell when it does not make sense strategically.
Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice.
How much money do I need to start investing in stocks? The amount of money you need to buy an individual stock depends on how expensive the shares are. (Share prices can range from just a few dollars to a few thousand dollars.) If you want mutual funds and have a small budget, an exchange-traded fund (ETF) may be your best bet. Mutual funds often have minimums of $1,000 or more, but ETFs trade like a stock, which means you purchase them for a share price — in some cases, less than $100).
Berkshire Hathaway -- Berkshire Hathaway is a conglomerate with more than 60 wholly owned businesses, including household names such as Geico, Duracell, Dairy Queen, and many more. The company also has a massive $230 billion stock portfolio, much of which was hand-selected by Warren Buffett, arguably the most successful investor of all time. Berkshire specifically targets businesses and stocks with durable competitive advantages and has a fantastic 55-year track record of executing on its vision of using its businesses to generate capital to reinvest in other businesses and stocks.
Finding the best stocks to buy and watch starts with knowing what a big market winner looks like before it takes off. As noted above, IBD's study of the top-performing stocks in each market cycle since the 1880s has identified the seven telltale traits of market winners. Your goal is to find stocks that are displaying those same traits right now. Traits like explosive earnings and sales growth, a strong return on equity, a fast-growing and industry-leading product or service and strong demand among mutual fund managers.
When you buy a stock, you should have a good reason for doing so and an expectation of what the price will do if the reason is valid. At the same time, you should establish the point at which you will liquidate your holdings, especially if your reason is proven invalid or if the stock doesn’t react as expected when your expectation has been met. In other words, have an exit strategy before you buy the security and execute that strategy unemotionally.

A (Excellent) - The stock has an excellent track record for maximizing performance while minimizing risk, thus delivering the best possible combination of total return on investment and reduced volatility. It has made the most of the recent economic environment to maximize risk-adjusted returns compared to other stocks. While past performance is just an indication -- not a guarantee -- we believe this fund is among the most likely to deliver superior performance relative to risk in the future as well.
Phrases like “earnings movers” and “intraday highs” don’t mean much to the average investor, and in many cases, they shouldn’t. If you’re in it for the long term — with, say, a portfolio of mutual funds geared toward retirement — you don’t need to worry about what these words mean, or about the flashes of red or green that cross the bottom of your TV screen. You can get by just fine without understanding the stock market much at all.
Stock investing is filled with intricate strategies and approaches, yet some of the most successful investors have done little more than stick with the basics. That generally means using funds for the bulk of your portfolio — Warren Buffett has famously said a low-cost S&P 500 index fund is the best investment most Americans can make — and choosing individual stocks only if you believe in the company’s potential for long-term growth.
Diversification allows you to recover from the loss of your total investment (20% of your portfolio) by gains of 10% in the two best companies (25% x 40%) and 4% in the remaining two companies (10% x 40%). Even though your overall portfolio value dropped by 6% (20% loss minus 14% gain), it is considerably better than having been invested solely in company E.
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