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Nov 27, 2021

How to Invest in Stocks: A Beginner's Guide

Investing in stocks can be intimidating for someone who has never done it before. There are so many options, unknowns, and questions. How do you get started? How do you know which stocks to buy, and when do you sell? If you don’t have very much money, how do you diversify properly?

Investing in stocks is challenging, but it doesn’t have to be intimidating. To make it easier, here is a six-step process to help beginner investors get started.

Step 1. Open an Account

Buying stocks today isn’t like it was in the 1980s, as portrayed in movies like The Wolf of Wall Street. You don’t pick up the phone and call a broker to make trades. 

Instead, investors can open trading accounts online, through an array of providers, called custodians. 

Many readers may have heard of Robinhood, which is an online brokerage platform offering commission-free trades. Robinhood is a reputable company where investors can open accounts, but there are plenty of other commission-free options like Charles Schwab, Fidelity, and others. 

Opening a brokerage account -- which is the type of account to open for trading stocks -- is easy pretty much no matter what custodian you choose. Just make sure they are a reputable brokerage that is also a SIPC member. 

Step 2: Determine How Frequently You Want to Trade

It’s important to have a game plan, which is often called an ‘investment discipline,’ before you start trading. Do you want to take the Warren Buffet approach of intensely researching stocks that you plan to hold for years or even decades? Or do you want to buy and sell more frequently with a goal of generating short-term profits?

New investors should take time to think deeply about what type of investor they want to be, because stock market volatility is famous for luring investors into emotional decision-making. Which is to say, poor decision-making. 

So, make a game plan, and think about how you want to trade.

A short-term trader generally holds investments for a few hours, days, or maybe a week or two. This style of investing is designed to turn a bunch of small gains to one big gain over the course of time.

Being a short-term trader requires a great deal of time (and skill) on the trader’s part. Short-term traders often use software and/or trading platforms to help them generate trade ideas. In some cases, the software or trading platform will have Artificial Intelligence capabilities, which investors can use to run analysis and generate trade ideas. 

The intermediate-term investor is usually in stock trades for a few weeks to a few months. This style isn’t as active as the short-term trader, so there isn’t as much turnover in the portfolio. Being an intermediate-term investor still requires time to monitor your positions and market conditions and make changes to the portfolio. 

The long-term investor looks for investments to hold for many months or even years. Typically, the longer an investment is held, the possibilities of big gains are greater, but so are the risks of big losses. Stocks don’t typically move 20% or 30% in a matter of days or weeks, in either direction. The larger moves tend to happen over long periods of time, whether it is a 50% gain or a 50% loss. Long-term investors tend to favor diversified portfolios designed to perform over long-periods of time. 

Step 3. Research Potential Investments

There are two main analysis styles—fundamental analysis and technical analysis.

Fundamental analysis involves evaluating the company based on metrics like earnings, sales, growth in key segments, and so on. Investors should ask questions like:

  • Are the company’s earnings growth from quarter to quarter?

  • What about the revenues? Are they growing or shrinking?

  • What about management? How efficient is management at providing a good return on equity?

 

These are the types of data points gained by doing fundamental analysis. Looking at fundamentals works better with a long-term investment strategy, but they can also play a role in the short-term as well. 

Technical analysis focuses on a stock’s price, analyzing how changes in price form patterns. Pretty much everything involved in technical analysis can be found on a securities’ chart—moving averages, overbought/oversold indicators, trading volume, etc. There are hundreds of technical indicators that have been developed over the years.

Technical analysis can play a significant role in the short-term movements of a stock, but they can also play a role in long-term movements as well. One of the most common mistakes investors make is thinking like a short-term trader and only looking at the daily chart. When you do this, you can miss signs on the weekly or monthly charts. For example, a stock may look like it has broken support on the daily chart, but when you look at the weekly chart, you find it is sitting right on a long-term moving average that could provide support.

The various analysis tools can be overwhelming for beginner investors. But don’t despair – there are tools at your disposal that can help you evaluate fundamentals and charts quickly and effectively. 

Tickeron's Screener tool allows investors to pull up company fundamentals in seconds, and even provides proprietary fundamental analysis for the trader. For technical analysis, Tickeron has an array of Artificial Intelligence tools that can identify chart patterns and generate trade ideas with odds of success. 

Step 4. Understand Your Risk Tolerance

The fourth step to take before investing in stocks is to determine your risk tolerance level. How comfortable are you with taking losses? What would you consider a big loss? Are you so worried about losses that you can’t sleep at night? 

Investors with a high tolerance for risk may be comfortable with trading more frequently, while those less comfortable with risk may prefer a buy-and-hold strategy limited to large-cap stocks. Knowing your risk tolerance can inform how frequently you trade and the types of stocks you trade.

You should also factor-in your investment goals. What you plan to do with the money could be very important in determining how you want to invest it. If this money is just to try your hand at investing, and you do not need it to live, maybe you will be comfortable taking more risks. If this money is earmarked for retirement or a big life purchase, like a home, you may want to be more cautious about your approach.

One thing to keep in mind about your personal risk tolerance assessment is that it isn’t etched in stone. You may become more tolerant of risk as you become more experienced in stock investing and trading. Your goals and needs will likely change over time, so keep evaluating them along the way. 

Step 5: Practice! 

Before committing real money to the stock market, it probably makes sense to do some hypothetical trading. This way you can get a feel for how the stock market fluctuates over time, and also give you a better understanding of how you react emotionally to price changes.

Practice can also offer investors the opportunity to develop skills and investment disciplines, so you can have a repeatable process as part of your strategy. You can attempt to track your trades and profit/losses on your own, but there are also platforms that allow you to manage ‘virtual portfolios’ with ‘paper money.’ You can try your hand at stock investing for free here

Step 6: Diversify

An easy rule to remember is that the fewer the holdings in the portfolio, the more inherent the risk. Individual companies carry specific risks—a bad earnings report, a product recall, or a denial from the FDA on a new drug. All of these things can send a stock falling sharply.

The general goal of diversifying your portfolio is to make sure that a big loss on one holding doesn’t have the same impact on the portfolio as a whole. If you have ten holdings in your portfolio and one of them drops by 20% while the others remain constant, that means the overall portfolio is only down by 2% if the holdings have equal allocations. In the same scenario, a holding drops 20%, but with only two holdings, now the portfolio is down 10%.

Diversification is a good way to control risk while also offering an investor exposure to different sectors and regions. 

Step 7: Monitor Your Portfolio

Now that you have chosen your investments and have built your portfolio, the last step in the process is to monitor your investments. Going back to your investment style, the shorter your time horizon is, the more frequently you will want to check on your portfolio. If you are day trading, you pretty much have to watch your computer all the time. If you are trading for a few days or a few weeks, checking in every few hours should be the minimum.

The longer your investment time frame, the less you will need to check on the portfolio. If you are in the intermediate timeframe, checking your portfolio once a day might be enough unless the market is in a period of increased volatility. For some long-term investors, they may only check on their portfolio via their monthly statement at the end of each month.

As for how to monitor your portfolio, there are a number of ways you can do that. Almost all brokerage firms offer an online portfolio tracker of some sort. Most even offer an app of some kind that will allow you to set alerts on your phone should an investment breach a certain level—up or down.

Even if your brokerage firm doesn’t offer a portfolio tracker, sites like Yahoo Finance and Tickeron offer them for free.

While these sites will help you monitor the price action, they won’t help you re-evaluate the stock, either from a fundamental standpoint or technical standpoint. This is another area where Tickeron can help. Building a watchlist with your portfolio in it and then checking it each night can help monitor any new developments on the stock.

Conclusion

This six-step process is pretty easy to follow and it should allow you to learn more and more about investing along the way. There are ways to get more help when you are first starting out and then the methods can get more advanced as you get more comfortable.  One of the biggest keys to being successful is forming a discipline and using investment tools, where available, to guide the process. 

 

We invite you to check out our other premium products -- they’ll help you be best prepared to take on the market. Some of the premium products that might be helpful for a new trader are the AI Pattern Search Engine and the AI Trend Prediction Engine. For a continuing trader, AI Real Time Patterns and our Screener are a great way to pinpoint exactly what you’re looking for and to monitor the securities for an extended period of time. 

Related Ticker: AAPL

Momentum Indicator for AAPL turns positive, indicating new upward trend

AAPL saw its Momentum Indicator move above the 0 level on April 29, 2024. This is an indication that the stock could be shifting in to a new upward move. Traders may want to consider buying the stock or buying call options. Tickeron's A.I.dvisor looked at 70 similar instances where the indicator turned positive. In of the 70 cases, the stock moved higher in the following days. The odds of a move higher are at .

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Moving Average Convergence Divergence (MACD) for AAPL just turned positive on April 25, 2024. Looking at past instances where AAPL's MACD turned positive, the stock continued to rise in of 40 cases over the following month. The odds of a continued upward trend are .

AAPL moved above its 50-day moving average on May 02, 2024 date and that indicates a change from a downward trend to an upward trend.

The 10-day moving average for AAPL crossed bullishly above the 50-day moving average on May 06, 2024. This indicates that the trend has shifted higher and could be considered a buy signal. In of 14 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where AAPL advanced for three days, in of 327 cases, the price rose further within the following month. The odds of a continued upward trend are .

The Aroon Indicator entered an Uptrend today. In of 392 cases where AAPL Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Bearish Trend Analysis

The RSI Indicator demonstrates that the ticker has stayed in the overbought zone for 4 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 9 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where AAPL declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

AAPL broke above its upper Bollinger Band on May 03, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 89, placing this stock better than average.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. AAPL’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to consistent earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (35.461) is normal, around the industry mean (79.080). P/E Ratio (26.429) is within average values for comparable stocks, (45.119). Projected Growth (PEG Ratio) (2.092) is also within normal values, averaging (1.742). AAPL has a moderately low Dividend Yield (0.006) as compared to the industry average of (0.025). P/S Ratio (6.925) is also within normal values, averaging (68.706).

Notable companies

The most notable companies in this group are Apple (NASDAQ:AAPL), GoPro (NASDAQ:GPRO).

Industry description

TVs, telephones, washing machines, home speakers and even home-office equipment like computers and printers…the list is virtually endless when it comes to consumer electronics and appliances. And, with ‘smarthomes’ increasingly becoming the reality, we could see a sharp surge in high-tech gadgets (including robotic appliances) making their way into our homes– and therefore spelling plenty opportunities in the related industries. Consumers account for 70% of US GDP, and their purchases of high-functioning electronics could make significant dents in the economy’s health. Sony Corp., Whirlpool and iRobot are some of the major consumer electronics/appliances makers.

Market Cap

The average market capitalization across the Electronics/Appliances Industry is 77.61B. The market cap for tickers in the group ranges from 129.13K to 2.62T. AAPL holds the highest valuation in this group at 2.62T. The lowest valued company is IALS at 129.13K.

High and low price notable news

The average weekly price growth across all stocks in the Electronics/Appliances Industry was 0%. For the same Industry, the average monthly price growth was 5%, and the average quarterly price growth was 11%. KOSS experienced the highest price growth at 50%, while TKLS experienced the biggest fall at -64%.

Volume

The average weekly volume growth across all stocks in the Electronics/Appliances Industry was -17%. For the same stocks of the Industry, the average monthly volume growth was -14% and the average quarterly volume growth was -19%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 65
P/E Growth Rating: 65
Price Growth Rating: 58
SMR Rating: 82
Profit Risk Rating: 88
Seasonality Score: 29 (-100 ... +100)
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AAPLDaily Signal changed days agoGain/Loss if shorted
 
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A.I.Advisor
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A.I. Advisor
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General Information

a manufacturer of mobile communication, media devices, personal computers, and portable digital music players

Industry ElectronicsAppliances

Profile
Fundamentals
Details
Industry
Telecommunications Equipment
Address
One Apple Park Way
Phone
+1 408 996-1010
Employees
161000
Web
https://www.apple.com
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