Understanding the basics of a stock market

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Trading on the stock market may seem like a task suited only for those Wall Street magicians, but if you take your time you’ll see that it’s nothing difficult and you can make a good profit yourself. If you are fascinated by technology, you might want to invest part of your stock market portfolio in the companies that make the products you use and love every day. Investing in technology can be a wise move, but as with any type of investing, it is a good idea to do your homework first. Understanding your investment choices will help you make the best decisions.

Invest in What You Know

Investing in what you know and understand is a good rule of thumb for all stock market investors, but it can be particularly important for technology stock investors. Warren Buffett has famously advised investing in companies you like, and few can argue with his success. Investing in the companies that make the products you use every day is one of the best ways to get started with technology investing.

Mutual Funds

Technology shares can be volatile, and choosing individual tech stocks can be risky. As an investor, you might want to choose a few individual stocks based on your personal knowledge and consumer preferences, while keeping the bulk of your tech investments in a mutual fund that invests in a basket of technology stocks instead of just a few.

This diversification can spread the risk in your portfolio and give you an investment that is considerably less volatile than those individual stocks. One way to gauge the volatility of a tech mutual fund is to look at its beta coefficient. The beta coefficient is a measure of a fund’s volatility. The stock market as a whole has a beta of 1, so a fund with a beta of 1.5 would be 50 percent more volatile than the overall stock market.

Exchange Traded Funds

An exchange traded fund combines the advantages of an individual stock with the advantages of a mutual fund. Like a stock, an exchange traded fund can be bought and sold during the trading day, allowing investors to set the price at which they buy and sell the security.

As you can see, there is nothing difficult in stocks – just take some time, use the above tips to get started and go on. Technology funds are a great example to start with, as they are the most popular and some of them are pretty cheap nowadays.

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