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The Ten Most Important Points about Stock Investing

Part of the Stock Investing For Dummies Cheat Sheet

If you're committed to investing in stocks, keep the following points in mind as you make your choices and reap your rewards. After all, stock investing is fun and frightening, sane and crazy-making, complicated and simple — and you may need reminders to stay focused.

  1. You're not buying a stock; you're buying a company.

  2. The primary reason you invest in a stock is because the company is making a profit and you want to participate in its long-term success.

  3. If you buy a stock when the company isn't making a profit, you're not investing — you're speculating.

  4. A stock (or stocks in general) should never be 100 percent of your assets.

  5. In some cases (such as a severe bear market), stocks aren't a good investment at all.

  6. A stock's price is dependent on the company, which in turn is dependent on its environment, which includes its customer base, its industry, the general economy, and the political climate.

  7. Your common sense and logic can be just as important in choosing a good stock as the advice of any investment expert.

  8. Always have well-reasoned answers to questions such as "Why are you investing in stocks?" and "Why are you investing in a particular stock?"

  9. If you have no idea about the prospects of a company (and sometimes even if you think you do), use stop-loss orders.

  10. Even if your philosophy is to buy and hold for the long term, continue to monitor your stocks and consider selling them if they're not appreciating or if general economic conditions have changed.

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