Understand the Stock Market

The investment program of many people starts and ends with a “hint.” This hint could come from a friend that works in a company that has developed a new product, that has accomplished a contract with the government or that is experimenting a fast growth. It could also come from a conversation that you casually heard at the barbershop, a restaurant or in the subway. By general rule, hints of this kind do not have good results and they usually end in losses, if not all the money invested at least part of it.

Why do all the investments done under the base of a hint are doomed? To invest like that is like beginning a house by the roof. Before buying shares, debentures, real estate or whatever, the investors should decide what their long-term goals are. Once long-term objectives are established it is easy to determine if the buying of a determined security fits or not within your global plans. The long term plans also help the investors to fix the level of risk that they are willing to confront for obtaining a concrete reward (risk quotient/reward), so as to determine if they themselves are the ones who are going to take the concrete decisions or if they will leave the task to the arbitrage of professional managers.