Why Invest in the Stock Market? And what has Buffett got to do with it?

Investing in the Stock Market
Assuming that you have some money, and want to increase that initial sum of money to become very rich. You should invest in the stock market, and buy stocks yourself. Why invest in the stock market? The stock market is a very good way of making lots of money if one knows how to do so. I myself am a fan of Warren Buffett's method of investment. True enough, modelling some famous investor could be useful, but "a poll is no substitute for thought"... if I remember Buffett correctly. This means that we should emulate Buffett, but with our eyes wide open, and amend our investment strategies accordingly.

There are technical analysts, value investors (of which Warren Buffett is the greatest exponent, along with his teacher Ben Graham), speculators, fund managers, and so on. Now I am recommending that to make a lot of money, you can replicate Buffett's system.

One, buy low and sell high. Many make this mistake. They buy high and sell low, when fear sets in.

Two, don't trade too much. Costs are certain, but profit is not certain. Hence, try to keep transaction costs low and see that you make money on stocks.

Three, fundamental analysis is more important than technical analysis. The stupidest reason, according to Buffett, is to buy something because the price is rising. This is the key idea here: margin of safety. This means that you buy a company that is strong fundamentally and that the price you pay is lower than the company's perceived strength and economic advantage. You want to buy a good company at a cheap relative rate.

Four, make sure you can list out the reasons why you buy a stock. What are its strengths? Does it have a comparative advantage? If you cannot answer basic questions about the company, DON'T DO IT!

Finally, investing takes time. You won't make money right away. Do these and in the long run, you won't regret.

Investing in the stock market can make you a really rich person. Do visit my website on finance, investment, money making ideas and more, to find out how to become very rich.

by Shawn Seah
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