Key Messages
How To Become A Smart Stock Investor: Learn From History’S Great Winners And Losers
Making money on the stock market can be a scary proposition, with so much potential to lose everything – or on the flip side, to make big profits.
If you want to maximize profits and avoid losses, then learning from history is key.
Studying what makes some stocks winners and others losers can help you strategize for success.
Here, you’ll discover techniques for winning big on the stock market – from understanding the telltale signs of a great stock to knowing which type of companies are worth investing in.
You’ll learn about “cup with handle” formations, what Cisco Systems and General Motors have in common that makes them successful investments, and how truly innovative companies often thrive far more than their competitors.
With these tips in your pocket, you’ll soon be finding smart ways to make money in stocks!
It’S Time To Pull Out The Charts: How To Spot Repeatable Patterns In The Stock Market
When it comes to investing, understanding the patterns in stock charts is essential for successful trading.
What used to be true a hundred years ago is still true today – there are great winners and great losers when it comes to the stock market.
By understanding how stocks behave in different scenarios, investors can make informed decisions on when to buy or sell their investments.
The key pattern you should learn is the Cup with Handle.
This pattern displays itself after a stock has risen for a period of time, then falls forming a rounded, downward curve which becomes a steady flat line – the base of the cup – followed by an upward climb which forms the other side of the cup and then finally dipping back down to form what’s known as “the handle”.
Once this point is reached, investors should jump in as more often than not, this signals that the stock will shoot upwards providing strong rewards for those who have bought into it.
The Most Important Quality In A Good Stock: Look For Companies With Increasing Earnings
When it comes to stocks, an increase in earnings is the single most important quality to consider.
History supports this claim, with two notable examples of companies which have seen tremendous success due to large gains in their earnings.
Google and Apple each had dramatic stock rises based on their various earnings gains leading up to their respective peaks.
Google’s stockrocketed after showing 112 percent and 123 percent increases in its EPS numbers.
Meanwhile, Apple showed an impressive 350 percent increase in its earnings before its own stock gained impressively.
The lesson for investors is that only investing in stocks with genuine, growing profit is the surest way to succeed – avoid speculation around stocks which do not have actual earned money backing them.
That’s why iPs should be one’s focus when searching for profitable companies; by dividing a company’s total after-tax profits by the number of shares issued you can clearly see how much of a gain they are enjoying.
Real gains year-over-year are key in order understand how well a company’s stock may perform – therefore ensuring that you make educated decisions prior to investing.
It Pays To Invest In Revolutionary Companies, But You Need To Get The Timing Right
Throughout history, companies that introduced revolutionary technologies have experienced skyrocketing stock prices.
Take Northern Pacific, for example; its stock prices increased 4,000 percent in just two years from 1900 onward.
Then there was General Motors which went up 1,368 percent between 1913 and 1914 on the new automobiles it produced.
Lastly, Cisco Systems developed networking equipment to connect computer networks – its price went up 75,000 percent between 1990 and 2000!
When investing in innovative companies, timing is everything.
It’s important to not follow traditional market advice as some of these stocks can go much higher than expected even if they are at an all-time high – like Cisco Systems.
The key here is to be able to spot the stocks that are about to break out by looking for the “Cup with Handle” sign or other signs of consolidation.
Do your research in the current market and look for groundbreaking companies such as Apple or Microsoft at a low point where you can buy them without taking on too much risk but also reap the rewards of their growth potentials when they skyrocket later on if timed correctly!
How Supply And Demand Affects Stock Prices: Understand The Law And Look For Strategic Signals
In the stock market, supply and demand play a big role in determining which stocks you should buy.
If you’re looking at companies with many issued shares, a large influx of buyers would be necessary for the stock to rally significantly.
However, for smaller companies with fewer issued shares, price movements can be much more drastic due to limited supply.
This is why it’s important to pay attention to how many shares a company has issued when choosing stocks.
It’s also important to pay attention to who owns these shares; if management has at least 1-3 percent of a larger business or even more of a small one, then this could be seen as sign that they have a vested interest in the success of the company – making them better investments overall.
Another factor to keep an eye on is that of companies buying back their own stock – as this suggests that there is potential for improved earnings and thus higher demand.
Supply and demand are both key factors in deciding which stocks make for the best investments, so make sure you pay close attention to these things before starting your investing journey!
Invest In Industry Leaders Not Second-Best Companies To Increase Returns
When investing in the stock market, it’s important to remember that you should always buy industry leaders.
These aren’t necessarily the biggest or most recognized companies, but rather the ones with the best quarterly and annual earnings growth, strongest sales growth, widest profit margins and highest return on equity.
A leading company will also have a unique and innovative product which is driving their success.
For instance, when the bull market was at its peak in 1979 and 1980, industry leaders like Wang Labs, Tandy, and Datapoint saw drastic increases of up to sevenfold!
Meanwhile, some of the more “established” brands such as IBM and Burroughs remained static.
This just goes to show that investing in dynamic companies can bring higher returns than always settling for reliable “old favorites”.
It’s essential to avoid second-best or copycat companies as they pale in comparison to the industry leader.
Andrew Carnegie put it best when he said: “The first man gets the oyster; the second, the shell” – Always invest in true innovators who drive progress (and profits) forward!
The Key To Success In Stock Investing: Institutional Sponsorship And Smart Analyzing
When investing in stocks, there are a few key factors to consider.
One of the most important is whether or not there are institutional sponsors for the stock.
Obtaining institutional sponsorship is essential to driving stock prices higher and helping individual investors achieve a greater return on their investments.
Big institutions in the United States provide mutual funds consisting of different stocks bundled into one investment option.
It’s worth taking the time to check which stocks these experts pick when managing these funds as well.
Pay attention to what the best performing funds are doing and research what their top holdings are; this way, you can take advantage of those stocks and watch them rise in your own portfolio.
Get familiar with the stock-picking philosophy outlined by fund managers; reviewing prospectuses will tell you which techniques they use and kinds of stocks they’ve purchased.
Nonetheless, it’s important not to forget about due diligence; sometimes, fonds may become “over-owned” by big institutions and not perform as expected or even see its prices decrease in value.
Monitor The Market Yourself To Spot Changes And Avoid Unexpected Losses
It’s important to monitor the performance of the general market if you want to make money in stocks.
This means taking a close look at big stock indices such as S&P 500, Dow Jones Industrial Average, and Nasdaq Composite.
These can be accessed online and give you an idea of how stocks are doing as a whole.
For instance, if you see that stocks open high and close low each day, then there may be evidence of a bear market where prices are falling.
On the other hand, if you see stocks opening weakly but closing strongly, it could signify the beginnings of a bull market.
Keeping track of these trends on a regular basis is critical for judging the state of the market and making profitable investments.
By staying up to date on what’s happening in the markets, you won’t get surprised by sudden market changes or large losses due to not being aware of when to buy or sell stocks.
Ignoring broader trends in favor listening exclusively to financial experts or reading investor newsletters will also cost you precious time and money: what’s better than observing the markets firsthand?
Wrap Up
The How to Make Money in Stocks Book has many pieces of actionable advice that can be taken away from it.
Here is a final summary for its key points:
Firstly, it is essential to learn how to read stock-price patterns and look out for the Cup with Handle pattern.
Furthermore, be sure the chosen stock is sound – industry leader status is ideal with an innovative product or service and increasing earnings.
Lastly, take note from the top fund managers but make sure to do your own research on each investment opportunity.
In conclusion, one important thing to remember when investing in stocks is to cut your losses!
If a stock takes a plunge of 8 percent below your buy-in price, it’s best to sell before you incur further losses.
This way, you can guarantee that some of your investments will turn into profitable wins.
