Safe Investing: Profiting with Stocks in Today's Market

In the words of Warren Buffett, " look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." It pays to stand your ground in a turbulent market instead of running for the hills like everyone else. Take the time to reevaluate your holdings and determine whether the recent drop in stock value was the result of bad management and press or simply the result of an industry trend. If the drop was caused by an industry downturn, I would recommend keeping it since there is a solid potential for it to bounce back. When the market is fluctuating, you should constantly be on the lookout for bargain stocks or high growth potential stocks to add to your portfolio. Try to buy low and sell high. Nonetheless, regardless of which stocks you decide to invest in, keep these tips in mind:

1) Maintain a Stable Cash Reserve - do not invest all your money into stocks and always put aside a solid amount of money for a rainy day. The last thing you want to do is to be forced to sell your shares in a down market because you need cash for an emergency.

2) Invest for the Long Term - do not be a short term trader. You don't want to pay fees for trade transactions (which do pile up rather quickly) and you don't want to sell in a turbulent market. If you invested in a solid company, don't worry about how it's doing in the short term, since chances are, it'll resume its growth once the market stabilizes.

3) Stay Grounded - The worst mistake investors make is to lose sight of the market reality. The moment you're absolutely convinced that your stocks are all winners is when you're screwed. Always be prepared for the worst and don't invest more money than you're willing to lose.

4) Stay Updated on the News - if you want to be a good investor, make sure to keep up with the news. Even if you are investing long term, you need to be ready to sell if disaster strikes. Such examples of disasters are: Toyota's recall (sell high, buy at lowest point), BP's Gulf OilSpill (sell if you own BP or RIG). By staying on top of the news, you'd minimize your losses by jumping out of a sinking boat instead of drowning there in your sleep.

Although these tips may seem like common sense, you'd be surprised by how challenging it is to actually follow through. If you aren't investing in stocks yet, I would highly recommend you give it a try. It's actually very profitable if you're brutally honest with yourself and only invest what you're willing to lose. Good luck!

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