The Secret Behind Stock Investments

Stock investing or making a stock investment isn't going to require experience in the stock-market. You don't need to pick stocks on your own or take on excessive risk to invest in stocks. Here's a simple starter guide to stock investing for novices.

What you may need to know about the stock exchange when you make your first stock investment is that stock prices fluctuate. Stocks trade on exchanges, and historically when held for the long term stocks have produced returns of approximately 10% annually. Over the shorter-term the market goes through cycles called bull markets (rising prices) and bear markets (falling prices).

Quite often bull markets prevail and most investors earn money. In bears markets the great majority of investors lose money, as most stocks fall in value.

Investing for novices should not be about trying to pick stocks that will outperform the stock market in general. Stock investing, especially investing for novices, should be about making a stock investment without speculating and taking on heavy risk.

The simplest way to invest in stocks without speculating is to invest in investment funds: exchange traded funds (ETFs), and mutual funds. In both cases you make a stock investment by purchasing shares. You then own a small part of a large portfolio of stocks which is managed for you and all of the other investors who own shares.

To invest in stocks through an ETF you are going to need a brokerage account. Stock mutual funds can be purchased in several ways: through an investment professional, in a 401k-type plan, in a brokerage account, or by dealing directly with a no-load fund company.

Unless you've got an investment adviser you are going to need to pick your own funds to invest in. As a general guide to investing for novices, I suggest you start investing with an important stock index fund.

For instance, stock symbol SPY is definitely an ETF that tracks a major stock index, the S&P 500 Index. Various mutual fund companies offer S&P 500 Index funds as well. In either case, they may be a stock investment that tracks the performance of 500 of the largest stocks (large cap stocks) in America.

In good times in bull markets, you definitely will make money. In bad times and bear markets for example in 2008, expect to lose money as well as just about everybody else who decided to invest in stocks.

The excellent news about investing in a stock index fund that tracks the currency markets: much of the time stocks go up in value. Plus, unlike folks who pick stocks to beat the market, you do not need to sweat the possibility that you chose poorly ... resulting in larger than average losses.

Now that you know where to invest in stocks to participate in the stock-market without undue risk, Keep Reading you will want to learn about investment strategy. As soon as you learn to avoid major losses in bear markets, you're way in advance of most investors.