You can trade stocks for both long term investing as well as short term day trading. So how to go about trading stocks?
In the beginning of each year, identify ten highest performing stocks. Now there are thousands of stocks that are listed. In the US alone there are more than 50,000 stocks that are listed on the different stock exchanges. Once you have identified the ten top performing stocks, study them.
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Focus on its price action and how well it matches with the S&P 500 Index. Before you invest in any stock, observe it for at least one week and do not put any money into it unless you probe it thoroughly and feel comfortable with it.
In the past few years, Exchange Traded Funds or what you call ETFs have become highly popular. ETF share can be traded like a stock with no uptick rule that can prevent you from shorting it. In addition to that an ETF gives you the diversification benefits of a mutual fund with less fees as compared to the mutual fund. ETFs are a much superior investment right now as compared to directly investing in stocks or mutual funds.
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Now with mutual funds, you can only sell it share after the close of the trading day when it's NAV (Net Asset Value) is calculated. But with ETFs, you can buy or sell it's shares anytime of the day just like a stock. Most of the ETFs have been developed in such a manner so as to mimic some stock index, sector index, industry index or any other composite index. This makes these ETFs almost similar to those indexes.
Another advantage of ETFs are that they are not so news dependent as compared to individual stocks. Individual stocks tend to react violently to breaking news as compared to ETFs.
So what are the best stocks to invest in 2010? Should it be a micro cap, a mid cap or a large cap or a growth stock or a value stock. Investing in micro cap stocks comes with a dream. The dream of picking a micro cap stock that will sky rocket into a mid cap and eventaully into a large cap give you a huge ROI. The rewards can be astronomical and your percentage gains larger than you expected. Though the chances of you picking the right micro cap stock is pretty slim!
However by investing in Micro Cap ETFs, you can reap the rewards with only a few micro cap stocks soar and take the micro cap index up with them. You can reducing your risk and increasing diversification but losing some of the upside potential with investing in Micro Cap ETFs! There are many different ETFs. in 2010, invest in ETFs and reap the rewards!
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