Over the long run, value stocks outperform growth, so look for stocks trading at relatively cheap valuations based on price-to-earnings ratio (P/E), price-to-sales ratio (P/S), and price-to-free-cash-flow ratio (P/FCF). It is vital not to chase opportunities, but rather wait for them because patience always pays. Solid fundamentals and a large moat (barrier to entry) are also vital for long-term sustained success. Also, use technical analysis and charting to better help pinpoint both the entry and exit points for the stock under consideration—both for a target profit area and a stop loss.
In contrast, professional fund managers (information here) do not want tips. They have dozens of good ideas of their own. They won't be sharing those ideas with you and they will not be expecting you to share yours. Instead, they ask about how you allocate money. "Which sectors and markets do you like and why?" The difference between these approaches is like night and day.
The biggest obstacle to stock market profits is an inability to control one’s emotions and make logical decisions. In the short-term, the prices of companies reflect the combined emotions of the entire investment community. When a majority of investors are worried about a company, its stock price is likely to decline; when a majority feel positive about the company’s future, its stock price tends to rise.
In contrast to finding an expert or two that seems to make valuable and careful decisions, do your best to avoid listening to share market 'tips' from friends or work colleagues. Typically these people will know less than you and have very little to base their suggestion on. No matter how well meaning it may be, advice from someone who knows next to nothing about the topic in question is not advice.
There are plenty of interesting and simple online tools which can be used to improve your trading results, such as the Relative Strength Index (RSI). This is just one example from among dozens of possible technical analysis (TA) options, and you will need to discover and decide which ones work best for you. You may need to paper trade to figure out the best TA tools for you and your strategy. Besides these sorts of technical analysis indicators, there are a few "tried and true" rules:
Use limit orders: Always use limit orders rather than market orders, when trading penny stocks. The very act of buying or selling shares in a company that is thinly traded can result in the price moving due to your trade. In other words, your buy might cause the shares to temporarily and artificially increase, then drop back down as soon as your purchase has been filled.
But this isn’t your typical market, and you can’t show up and pick your shares off a shelf the way you select produce at the grocery store. Individual traders are typically represented by brokers — these days, that’s often an online broker. You place your stock trades through the broker, which then deals with the exchange on your behalf. (Need a broker? See our analysis of the best stockbrokers for beginners.)
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.
Use limit orders: Always use limit orders rather than market orders, when trading penny stocks. The very act of buying or selling shares in a company that is thinly traded can result in the price moving due to your trade. In other words, your buy might cause the shares to temporarily and artificially increase, then drop back down as soon as your purchase has been filled.
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.

It can be helpful to start with paper trading, or simulated trading that allows you to practice without risking actual money. By keeping track of pretend money, and making imaginary trades, you'll learn what tactics work and what sorts of penny stocks provide you with the greatest profits. If you lose on your trades, you don't lose cash in real life, and ideally, you'll learn some things that you might be doing wrong.

Finally, the other factor: risk tolerance. The stock market goes up and down, and if you’re prone to panicking when it does the latter, you’re better off investing slightly more conservatively, with a lighter allocation to stocks. Not sure? We have a risk tolerance quiz — and more information about how to make this decision — in our article about what to invest in.

How much money should I invest in stocks? If you’re investing through funds — have we mentioned this is our preference? — you can allocate a fairly large portion of your portfolio toward stock funds, especially if you have a long time horizon. A 30-year-old investing for retirement might have 80% of his or her portfolio in stock funds; the rest would be in bond funds. Individual stocks are another story. We’d recommend keeping these to 10% or less of your investment portfolio.
7. Don’t concentrate on the money – This may sound counterintuitive, but it makes good sense. Having money at the forefront of your mind could make you do reckless things, like taking tiny profits in fear of losing what you’ve already won, or jumping straight in so you don’t miss a move. Instead, focus on sticking to your strategy and let your strategy focus on making you money.
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.
Have a complete 360-degree view of what you’re buying before you buy it. Fundamentally, take a look at what’s under the hood of the company with regard to earnings ratios. Technically, understand what’s happening in the short and long term with support and resistance. Know your exit strategy and your money management strategy, including stop losses.
It also takes the reader through a path that should help anyone make better decisions based on their own personal circumstances so that they can plan their own path. In other words, there are no short-term investment tips here, only sound fundamental guidance for the long-term. This book redefines investment related advice and is highly recommended for investors at all levels.

When choosing where to trade, do not rely on any site that can't point to a 100-percent unbiased guarantee. Regardless of what they call it, you only want to trust a website or service that ensures your best interests are front and center. They should commit to everyone that they will not trade in the shares they tell their customers about, and that they're not simply touting their own investments.
A person who feels negative about the market is called a “bear,” while their positive counterpart is called a “bull.” During market hours, the constant battle between the bulls and the bears is reflected in the constantly changing price of securities. These short-term movements are driven by rumors, speculations, and hopes – emotions – rather than logic and a systematic analysis of the company’s assets, management, and prospects.
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).
Buy “the basket”: Can’t decide which of the companies in a particular industry will be the long-term winner? Buy ’em all! Buying a basket of stocks takes the pressure off picking “the one.” Having a stake in all the players that pass muster in your analysis means you won’t miss out if one takes off, and you can use gains from that winner to offset any losses. This strategy will also help you identify which company is “the one” so you can double down on your position if desired.
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