how to get rich with stocks

As a follow up to my earlier post on Get rich off stock market – Get rich investing in good stocks for long term we can safely say that you can definitely make riches with stocks as well as with several other methods.

 

I am not going to be too deep with this and there is no secret formula to this. 

 

However I am big proponent of two things which are

1)      Buy low sell high

2)      Averaging the costs

3)      Long term investing

4)      Small portion of money on volatile stocks

5)      Cash at hand is a must

6)      Use crisis as a time to buy

Old fashioned as it may seem but these theories are by far the best that I know.

Let us each one of these one by one. In fact each one leads to another

Warren buffet

Always buy low sell high – Never start investing when the market is at a bull run and it all time high. Most investors will do that and then will have no cash when the market starts tumbling

Always when the economy is in recession buy the stocks and good stocks are available at dirt cheap prices.

Average out the costs – Again this is a long terms strategy but you can easily use this. Do not but too many stocks at one go. If you thing a good stock has potential then buy say 10 or 20 shares of that stock and sit tight. At every fall accumulate so that your cost of holding goes down.

But yes, if the stock is going to tumble because the company is going to be bankrupt then exit.

The strategy will yield handsome returns only if you invest for a long term basis and also you have a constant supply of cash. This leads to my next point and that is

 

Long term investing – Always go for the safe bet and that long term investing. In short term as stock market beginner you may need to be very alert as well have huge cash at hand to make money. The risk is too high.

 

Small portion of money on volatile stocks – have small percentage of your entire corpus invested in volatile stocks and then use the averaging strategy to make money. To use this strategy you need to initially pay small and then sell immediately if you have made money on these stocks. Once you have the money then gain invest in volatile stocks and keep on doing this to make handsome gains. Use cycles which are fifteen days or a month based on the time when you enter the market.

 

Cash at hand is a must – Always have 20-30% of cash at hand out of the total money which you wanted to invest. The reason is simple it will help to but stocks that are cheap at any given pint in time. It will help in averaging the costs too.

 

Crisis is good time to buy – Use the crisis as a best time to but the stocks. Again have your list ready of good stocks which are down because of the general market sentiment.

A lot of people invested in Goldman Sachs and Citibank at the height of the mortgage related meltdown a few months ago and now are getting rich.

So in all how to get with stocks is not very tough and the only thing is discipline and focus.

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