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4 Tips to Help You Buy Better Stocks

4 Tips to Help You Buy Better Stocks

Trading in the stock market can be both lucrative and devastating. This kind of investment is different from proactive investments, like house flipping, where you buy a rundown house, fix it up, and resell it for a much higher price. There you have control over your investment – the amount of effort and labor you put in improves your chances of selling for a profit.

But, buying and selling stocks is usually very non-proactive where you simply wait for prices to rise before selling for a profit. It seems like gambling, but the difference is, you can do research on the market environment and potential company you’re about to invest in so you can make an educated prediction on whether its stock prices will rise or fall.

Here are four more ways that can help you choose profitable stocks:

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1. Invest in companies making money.

Most new investors go into stock market trading thinking they can pick a random startup, buy some stocks, and wait to see if prices rise or fall. This makes it more like gambling and less like investing.

If you want to lower your chances of buying bad stocks (and save money), you should choose a company whose market you can understand, and carefully check the company’s financial history to see if they’re on the way up or down. Don’t rely on weird statistics, like random spikes in prices, but base your insights on gradual increases in stock prices and company revenue.

Even if you can’t tell from a company’s financial records whether it’s going to prosper, understanding the company’s market allows you to predict the upcoming overall environment, like if you’re well-versed in the augmented reality field and foresaw the huge boom Pokemon Go would bring for all augmented reality startups. Or if you’re more knowledgeable about mineral resources, you could try investing in new mining operations.

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2. Try to choose leaders instead of companies.

The most successful businessmen made their lucrative mark by thinking differently. For example, Jeff Bezos of Amazon introduced predictive analytics where he theorized that studying an individual buyer’s purchase history would provide better insight on which products to recommend to him.

Most stock market investors will focus on the company – think outside the box and focus on the people behind the company. Like seeing the forest for the trees, even if a company’s financial history looks bad, if a renowned guru just joined their team, you can expect great things in the future for that company and it would be wise to buy those stocks while they’re low.

3. Are there any competitors?

You found a new startup with over 1000 employees and approved loan applications for the construction of a fairly sized factory. Sounds great, right? Then you find out it’s planning on manufacturing cherry, vanilla, and fruit-flavored sodas. Turn away. Even if a particular company seems solid with ample financial backing and a large employee team, you should think twice before investing in it if its market has a lot of competitors.

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The soda market is huge, with the top brands already saturating the market with their different-flavored products. Unless this new startup is offering something radical, like glow-in-the-dark beverages, it will be a challenge for it to survive among the other established companies who are selling the same exact products.

4. Pay attention to the weather!

Buy stocks when it’s raining and sell them when it’s sunny. Why? Researchers found that people’s planning behavior is affected by the weather and temperature. In particular, they found that people buy less when it’s raining and buy more when it’s sunny – they found this leads to stocks underperforming when it’s drizzling and performing better when the sun is shining.

Of course, the weather’s effects on the stock market aren’t massive, but if you’re planning to invest in an iffy startup, why not buy their stocks on a rainy day when chances are their prices are lower. This means less risk for you because if you decide to sell your shares, you just need to wait for a nice sunny day when their prices are likely to rise (even if just a little).

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Investing in the stock market can be like gambling, but if you follow these tips you’ll lessen your risk of buying bad stocks.

Featured photo credit: Olu Eletu via images.unsplash.com

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Last Updated on March 4, 2019

How to Use Credit Cards While Staying Out of Debt

How to Use Credit Cards While Staying Out of Debt

Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

Do Not Treat Credit Cards as Your Funding Sources

Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

Make Sure to Always Pay Off Balances in Full Each Month

The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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Using Credit Cards with Rewards

Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

Featured photo credit: Artem Bali via unsplash.com

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