![]() Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence. " Managing positions: When to cut and run, when to take profits.We are an independent, advertising-supported comparison service. " When to Take Profits."įidelity Investments. "The Ostrich Effect" and the Relationship between the Liquidity and the Yields of Financial Assets" Journal of Business, Volume 79, Issue 5, 2006, Pages 1-27. " Do Individual Investors Treat Trading as a Fun and Exciting Gambling Activity? Evidence from Repeated Natural Experiments." ![]() " Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors." " Analysis Estimates Impact of Market Losses on 401(k) Account Balances." " The Impact of the Recent Financial Crisis on 401(K) Account Balances."ĮBRI. "Essential Statistics, Regression, and Econometrics,". " Wall Street and the Stock Exchanges: Historical Resources." Jeffrey Hirsch, chief market strategist at Probabilities Fund Management and editor-in-chief of The Stock Market Almanac, for example, has an "up 40%, sell 20%" strategy: When a stock goes up by 40%, sell 20% of the position when it goes up another 40%, sell another 20%, and so on. Other advisors use a more complex rule of thumb, involving gradual profit-taking. "The secret is to hop off the elevator on one of the floors on the way up and not ride it back down again," as Investor's Business Daily founder William O'Neil put it. Some financial pros recommend taking a profit after a stock has appreciated around 20% to 25% in price-even if it still seems to be rising. Much depends on an investor's risk tolerance and time horizon-that is, how long they can afford to wait for the stock to earn, vis-a-vis how much profit they want to earn.ĭon't be greedy. But knowing when to actually cash out and take that profit, locking in gains, is a key question, and there's no one right answer. The ultimate aim of every investor is to make a profit from their stocks, of course. Investing in funds also has the advantage of diversification-their portfolios own dozens, even hundreds of individual stocks-which cuts risk. Leave the driving, er, investing, to them, in other words. There are financial professionals whose job is to "manage money," and when you invest in a mutual fund, ETF, or other managed fund, you're tapping into their expertise, experience, and analysis. Relying on the pros-don't try to pick stocks yourself. ![]() Or adopt a strategy like dollar-cost averaging, investing equal amounts, spaced out over regular intervals, in certain assets, regardless of their price. Take advantage of your employer's 401(k), if one exists, which automatically will deduct a percentage of your paycheck to invest in funds you choose. Having a far-off time horizon smooths out the volatility of short-term market dips and drops.īeing regular-invest in a constant, disciplined manner. Thinking long-term-the stock market has its ups and downs, but historically, it's appreciated-that is, increased in value-over the long haul. Even a small amount can grow substantially if left untouched. ![]() Starting early-thanks to the miracle of compounding (when interest is earned on already-accrued interest and earnings), investments grow exponentially. The percentage of stocks you hold, what kind of industries in which you invest, and how long you hold them depend on your age, risk tolerance, and your overall investment goals.īeginners can make money in the stock market by: These are shares in a publicly-traded company that are listed on a stock exchange. Stocks make up an important part of any investor's portfolio. Common investor mistakes include poor asset allocation, trying to time the market, and getting emotionally attached to stocks.Many people combat unsystematic risk by investing in exchange-traded funds or mutual funds, in lieu of individual stocks.The two main types of equity investment risk are systematic, which stems from macro events like recessions and wars, and unsystematic, which refers to one-off scenarios that afflict a particular company or industry.According to a 2011 Raymond James and Associates study on asset performance trends from 1926 to 2010, both small-cap stocks (12.1% annual return) and large-cap stocks (9.9% return) outperformed government bonds and inflation.Buy-and-hold investing in equities offers the most durable path for the majority of individual investors.
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