|
|||||||||
|
Creating Your Portfolio
"How do I know what stock to buy?" You don't! So don't worry too much about it! The markets are very efficient. What this "efficient markets" hypothesis means is that it takes the stock market just a few seconds to fully absorb news that will impact the financial performance of a company and reflect that in the price of the stock. So what chance do you have to know something that someone else doesn't know so that you can profit on a forthcoming change in the stock's price? Not much. In fact the best estimate of the future price of a stock is the current price of that stock. When you pick a stock, whatever stock you pick, you have about a 50% chance of doing better than the market. By "better than the market" we mean that your chosen stock will outperform the market average. For example, if the market increases in value by 10% over a given period, and your stock increases 12%, it has outperformed the market. Want some ideas about companies? Click here for "Stocks for Teens to Consider" from The Motley Fool. Back to stock trading instructions. "How do I know how much to buy." You need some information about your company. You especially need to know how much a share of stock is selling for. Then you divide the amount you want to invest in that company by the stock price to find the number of shares you want to buy. For example if I want to invest $10,000 in Gateway and it's trading at $5.01/ share, I want to buy $10,000 ÷ $5.01/share = 1,996 shares You can look up stock information by entering the symbol here. If you don't know the symbol, you can find it on the Investopedia site or use one of the sites listed below.
|