Tips on your First Stock: Buy, Hold or Sell?

Like the first love of your life, the first stock in your life is always the most memorable one. And it’s a sad fact, but like most first loves, people often make a loss from their first stock. There is one simple rule while investing in a stock: you need to buy low and sell high. This is not as easy as it sounds. You can never really know for sure what is high enough or low enough. You can never know if it is the right time to buy or if it is a good time to sell. Here are some suggestions on what you can do to select your first stock and make some good return from it.

Think Like an Owner

When you buy one share of a company, think as if you are buying the whole business. Is this company going to make a profit? How are they controlling their costs? Does the company’s outlook seem bright? Is the top management team legitimate and honest?

It’s a good idea to go back to the basics with a SWOT analysis. What are the strengths, weaknesses, opportunities and threats of the company? Does this company have a future you can count on? If you can answer all these questions with positive answers then this stock just might be the one for your portfolio.

To select a stock from the thousands of options out there, think of something you are familiar with. Think of a business you have some background in. Ask yourself whether this business will generate money in the future. You can visit the sites and observe the amount of transactions. Follow the company in the news and any changes in regulations or laws that may affect the business of the company.

How High is High Enough?

Once you have selected the company, the next decision to make is to ask three questions. When should you to buy it? How long should you keep it? And finally, when should you sell it? To answer these three questions, you need to observe the historical price movement of this stock. This will help you decide if the price is reaching its peak or if it has dropped to the bottom. Many famous investors choose to invest when bad news is affecting the economy as prices usually drop for the whole stock market. This is the time to hunt for the cheap stuff, kind of like an end of season sale. Then when all is well again and the stock prices rise together, this is when everyone is being optimistic with a positive view on the economic outlook. This is the time to be careful, as it may be the start of a bubble where prices rise above their true value. Beware the bubble. It may explode and prices may drop down the drain and there go all your savings.

You may ask: So how do we know whether it is a bubble and not just a good economic situation? The answer is nobody really knows for sure until it happens, but the trick is to not be greedy. Be brave when it is time to be brave and be strong enough to sell it when the price is high enough. Greed may ruin it all and you may miss your chance thinking the price could still climb up. The thing is, it might, but there has to be a time when you tell yourself that enough is enough and you need to sell the stock and make a gain from it. Although we all know we should buy low and sell high, people often buy high and sell low because everyone panics when things get rough in the market.

In conclusion, you should try to study the company you are considering in terms of purchasing your first stock. Dont let the market play with your head. Approach the decision to buy, hold and sell logically and not emotionally.