3) It is the only game in town. Outside of investing in commodities futures or trading currency, which are best left to the pros, the stock market is the only widely accessible way to grow your nest egg enough to beat inflation. Hardly anyone has gotten rich by investing in bonds, and no one does it by putting their money in the bank. Knowing these three key issues, how can the individual investor avoid buying in at the wrong time or being victimized by deceptive practices?

If investors can earn 8% to 12% in a money market fund, they're less likely to take the risk of investing in the market. If you liked this article therefore you would like to receive more info pertaining to extreme online casino please visit our page. At the same time, money markets and bonds start paying out more attractive rates. 2) When inflation and interest rates are soaring, the market is often due for a drop...be alert. High interest rates force companies that depend on borrowing to spend more of their cash to grow revenues. 3) Do your homework. Study the balance sheet and annual report of the company that's caught your interest.

But, after you've bought the stock, continue to monitor the news carefully. Nearly every company has an occasional setback. Read the latest news stories on the company and make sure you are clear on why you expect the company's earnings to grow. If you don't understand the story, don't buy it. At the very least, know how much you're paying for the company's earnings, how much debt it has, and what its cash flow picture is like. Don't panic over a little bit of negative news from time to time.

1) Consider the P/E ratio of the market as a whole and of your stock in particular. Most of the time, you can ignore the market and just focus on buying good companies at reasonable prices. Compare historical P/E ratios with current ratios to get some idea of what's excessive, but keep in mind that the market will support higher P/E ratios when interest rates are low. But when stock prices get too far ahead of earnings, there's usually a drop in store.

Individual investors have a huge advantage over mutual fund managers and institutional investors, in that they can invest in small and even MicroCap companies the big kahunas couldn't touch without violating SEC or corporate rules. Or, they'll bail out of stocks at the worst possible time by insisting that this time, the end of the world is really at hand. They will justify outrageous P/E's by talking about a new paradigm. 5) Take advantage of periodic panics to load up on shares you really like long term.

It isn't easy to do, but following this advice will vastly improve your bottom line. 6) Remember that it's not different this time. Whenever the market starts doing crazy things, people will say that the situation is unprecedented.