If you want to learn how to invest in stocks, start with a proven strategy for investing in the stock market for beginners. You'll find that long-term success starts with learning how to keep the odds in your favor and manage potential risk. The recent stock market volatility and quick shifts in market outlook offer clear examples of why that is crucial.
Every investor should try to establish what their goals and objectives are prior to investing. There isn’t necessarily a wrong objective, but it’s more important to understand your goals because that will help drive your decisions. For instance, if you plan to regularly trade in and out of stocks, you might be better off opening an IRA account so you don’t have to pay taxes on your trades. If you plan to be a long-term investor, taxes won’t be as important of a factor and you could hold your account in a taxable or tax-free account.
Cost advantages -- A business can have a few different types of cost advantages. For example, an efficient distribution network can make it cheaper for a company to get its product around the country. A well-known brand name can give a company the ability to charge more than rivals. Or a proprietary manufacturing process can make it cheaper to produce a product. Coca-Cola (NYSE:KO) is a great example. Not only does the company have a massive and efficient distribution network, it has one of the most recognizable and valuable brand names in the world.
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The most feared words on any stock exchange are margin call. A margin call is made when a position is losing money and more money is required by the broker to keep the trade open. If and when a stock ticker moves quickly, there can be people whose borrowing levels literally bankrupt them as things get worse ... fast. Volatility can be either a blessing or a curse, but if you have too much leverage, it can break a trader.
It’s likely some of these Americans might rethink pulling their money if they knew how quickly a portfolio can rebound from the bottom: The market took just 13 months to recover its losses after the most recent major sell-off in 2015. Even the Great Recession — a devastating downturn of historic proportions — posted a complete market recovery in just over five years. The S&P 500 then posted a compound annual growth rate of 16% from 2013 to 2017 (including dividends).
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