Basic stock market investing tips

There are many ways available to successfully invest your money and make it grow. One of these is to invest in the stock market. However, as with most types of investing, there is risk associated with investing in the stock market and it pays to do some research prior to starting. This way, you will have a basic idea of what is required and have an understanding of what you are doing and the risks involved.

For conservative investors with a low risk tolerance, one of the best ways to invest is through a mutual fund. These are funds of money which track a certain stock market index or group of companies.

The stock market can obviously go up and down and one of the best ways to invest is to take a long term view and invest some money each month. Your investment can then effectively be put on autopilot with money being invested on a regular basis. This is a less stressful way of investing because if the stock market goes down you will effectively be buying more for your money each month. To be effective it has to really be done over a number of years and the best time to cash out is when the stock market is high.

For those with a higher risk tolerance, you could consider investing in individual shares. This is obviously more risky than mutual funds, since the fortunes of companies can rise and fall and companies can go out of business. It is therefore essential to undertake some research prior to investing.

You should learn fundamental analysis, which is the assessment of a company's financial position over a number of years. In this way you can identify fundamentally sound companies which have the best prospects of being successful.

You don't need to do a full depth analysis, but at least set up a spreadsheet showing revenue, net profit/loss, net asset value and profit/loss per share for the previous five years. In this way you can gain an understanding of the company and how it is performing over time. It is not a guarantee of success but identifying fundamentally sound companies should improve your chances.

It is also important to have an idea of technical analysis which can be use in conjunction with fundamental analysis to greatly increase your chances of making money. There are many different forms of technical analysis available and the trick is to find one that you understand and are comfortable using. Typical examples include bar charts, candlestick charts and relative strength. One of the best is Point and Figure charting which tends to provide fairly clear buy and sell signals.

If you use fundamental and technical analysis together you will have a good chance of obtaining a return on your money by investing in the stock market. If you have some time, researching your investments is also an interesting and stimulating exercise.