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Basic Rules of Stock Investing

Introduction

Beginner’s guide to investing in stocks, and how to get started.

Rules for all investors

• Understand risk and reward.

The stock market can be volatile, so you should know your risk tolerance before investing in the market. If you are able to withstand ups and downs of the stock market, then it is not a problem if you miss out on some winning trades or end up losing money at times. The important thing is that you stick with a long-term investment strategy and understand that if an investment doesn’t turn out well for a few years, it may pay off eventually in a big way down the road.

• Diversify your portfolio with different types of investments.

You don’t have to own just one type of asset class (stocks, bonds or cash equivalents) because they each react differently to good news or bad news coming from Washington DC or Wall Street investors reacting positively after hearing positive news about how well things are going at their companies.”

Rules for people who want to be more involved

• You should be able to explain why you are investing in a particular stock, sector and country.
• You should be able to…