Stocks aren’t as complicated as you may initially think.  That’s good news.  Stocks do have a lot of complex math behind them, but it can all be simplified into cases of buy or sell.  Not only that but predicting markets and knowing where to put your money can be made easy, too.  Success equals a stock rise.  All you have to do is get on the bandwagon while there’s still plenty of room to grow and make a good profit.  Before you invest though, you need to know a few things.

Know Why You’re Investing

Stocks are not a get rich quick scheme.  We all hear about the traders who earn hundreds of thousands per day for their clients, but they are at the very top end of stock trading.

Not only that but that kind of day trading is very risky.  There’s a good chance you won’t make nearly that much if you try it for yourself.  You may even lose money.

Still, there is potential for short-term stock trading.  Short-term can last anywhere between a week to a few months.  If you’re looking to make money within that timeframe, short-term stocks are for you.

Long-term investments are made either to watch them grow over several years, or to be a steady and secure asset in case of having to liquidize at short notice for a cash injection.

Stock market quotes in newspaper by Andreas Poike, on Flickr.  This work is licensed under a Creative Commons Attribution 2.0 Generic License.

Know Who to Invest In

To make this simple, you’ve got big stocks and little stocks.  Little stocks are low-priced stocks from a small business.  If they’re on the rise, your relatively small investment can make much larger returns.  Identifying these businesses is as easy as flicking through the business papers for news on mergers, investments, and contracts.  All these add value to a business and can see the stock price rise.

Big stocks belong to the household name businesses.  They may usually have a very high buy-in rate because of how much the company is worth.  That said, they can still be a wise investment.  Let’s take Coca Cola stocks for this example.

Coca Cola is a business that sees continued growth.  They have a number of marketing deals with organizations around the world, and have a diverse product line that gets refreshed every couple of years.

The stocks are safe as houses.  If you are looking for a long-term investment, you’ll buy into the big stocks over the period of a decade or two.  You could start making these investments in your 20s and cash out in retirement for a nice big bonus.  If you’re lucky the business would have continued to grow since then.

Don’t Be Greedy

Your first big win on stocks might make you greedy.  It’s easy to get drunk on success when you hit a decent earning.  When this happens to people, they think they can replicate the success.  Realistically, they usually cannot.

Never reinvest all your earnings.  Only use a fraction of them.

Follow these tips and you can’t go wrong with stocks.  Be careful though, some markets are riskier than others.