How to Buy and Sell Shares – Part VI

Welcome to part six of our free How to Buy and Sell Shares series.

[Ed Note: You can now download the entire ‘How to Buy and Sell Shares’ six-part series for FREE. To download your copy right now go here.]

With all the ups and downs in the market this week I thought it would be a good time to address this question:

“I’m having sleepless nights worrying about my shares, is this normal?”

In short, no, it’s not.

If you’re having sleepless nights, worrying how your shares are doing, it means you’ve either invested too much of your money in the stock market, or you’ve invested in the wrong stocks.

That’s the thing with the stock market. Prices move down as well as up. You’ve got to be prepared to take the odd hit here or there in order to stand a chance of bagging big gains on the winners.

The way the odds work is something like this…

With blue-chip stocks you should find that eight out of ten will get you a good return. A good return being a nice dividend or a 5-10% annual growth rate.

With small-caps the strike rate is lower, because there’s more risk. So you may only get four or five winners out of ten picks. But those four or five winners could bag you gains of 50%, 100% or 200% in just a few weeks or months.

But it’s not for everyone. While the gains are big, you’ve got to be prepared for what can happen when the market falls. You’ve got to be able to lick your wounds and move on. Remember, it only takes one winner to rack up big profits in your portfolio.

But whether you invest in small-caps, large-caps, bank shares or mining shares, if you had any sleepless nights this week it means you’re doing something wrong.

No-one could have predicted what happened in Japan last week. But you can be prepared for these events. And it’s not that hard.

Being a stock market investor doesn’t mean you need to invest all your money in the stock market. Many times I’ve written to you suggesting you hold cash in the bank, some gold or silver as an insurance policy, some small-cap shares for a punt, large-cap growth shares for trading, and some dividend paying shares for income.

Sure, you still may have seen the value of your investments go down this week. But having a large cash balance would also have given you a nice cushion, and the opportunity to buy some bargains.

But it does mean having an active approach to investing. It means taking profits, cutting losses and – most of all – not investing more than you’re comfortable with in any single asset.

If you do all that there’s really no excuse for having sleepless nights worrying about share prices.

Kris Sayce

P.S. This is just one, of a six-part series written by Money Morning Publisher Kris Sayce. For your convenience we’ve bundled the whole series into a brand new report titled ‘A Beginner’s Guide to the Stock Market: How to Buy and Sell Shares’. In it you’ll find easy–to–read and jargon free instructions on the steps you need to take to jump into the market TODAY and buy and sell your first lot of shares.

If you’ve got an interest in the share market, but completely new to the whole deal and don’t know where to start… download Kris’ new report today and he’ll show you everything you need to know to get started. Go here to download your free report today.

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Fat Tail Investment Research, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

Money Morning Australia