Free Financial Lessons

Financial Basics, Tutorial #2 Be Careful

This video tutorial is available for watching at YouTube or here for free. My YouTube name is Featureman.

When you begin to trade, and even after many years of trading, I recommend only to purchase something which has an underlying value. I avoid puts and calls and options, because they can expire worthless. It is possible to lose all your investment no matter how good it looked when you bought it. Some stocks will go to zero, but most major companies will have value year after year. Study big multinational companies such as you will find in the S&P 500 or Dow 30.

High Tech Sometimes a high tech company is a good investment if it has a product which is meeting a growing demand. If you have expertise about a particular new field which is just beginning to catch on, that might be worth your investment dollar. Be very cautious about unproven companies, however. Almost every new product has some sales pitch behind it claiming a great breakthrough has come along. Wall Street is littered with the corpses of companies which made such claims.

A great product will not sell just because it is great. Humans who manage a corporation must be up to the task. A Board of Directors is like an unmanaged team of cats pulling a dogsled. Look for stability in the company in which you invest. Look at the volume, the dividend, the Price/Earnings Ratio and the 52 week high and low for starters.

Dream big, but invest with caution

Company crew Some people will buy stock in the company for which they work. That might be a good idea, but it is not recommended to invest all your capital or even a large percentage in one company. Be sure to diversify.