| Trading stocks involves two basic decision areas: | | | | the major exchanges. The popular stock ETF's are |
| stock selection and timing. In other words, what | | | | index funds that track a stock index. Trading these |
| stocks to trade and when to pull the trigger. For | | | | vs. individual stocks like JKL Financial has its |
| those of you who are not veteran traders, here's a | | | | advantages. This brief investment guide highlights the |
| basic investment guide to simplify stock selection for | | | | ETF advantage. |
| you. | | | | You can avoid specific risk by trading the major-index |
| Trading stocks is risky enough without adding an | | | | stock ETF's. For example, (SPY) tracks the S&P |
| extra element of risk to the mix. I'll refer to this | | | | 500 Index. If the stock market is up as measured by |
| extra element as specific risk. Let me give you an | | | | the S&P 500, (SPY) should follow suit. |
| example of specific risk, and why I try to avoid it. | | | | Traders can focus on a sector or industry group of |
| The stock market has been volatile and financial | | | | stocks by buy and selling a single stock. For example, |
| stocks are the center of attention. After being | | | | instead of picking JKL Financial, you could have traded |
| pounded for a few days, you expect them to | | | | (XLF) which tracks an index of major financial stocks. |
| rebound. JKL Financial has been especially weak for | | | | In which case you'd have made money and not lost |
| no obvious reason. It's early in the trading day when | | | | it. |
| a news alert hits the market...good economic data. | | | | You can trade and profit from price increases in hard |
| You jump on JKL. Sure enough the stock market | | | | assets or commodities like real estate, basic |
| soars on the good news, lead by financial stocks. JKL | | | | materials, oil, and gold by simply trading the |
| takes a dive. After taking your loss like a man, it | | | | appropriare stock ETF. |
| comes to your attention that JKL's accounting | | | | Stock traders can go long or short (bet up or down) |
| practices were in question, and the news went public. | | | | with one simple buy transaction in their brokerage |
| Few things ruin the trader's day more than lost | | | | account. If you want to bet that stocks will fall, you |
| opportunity. In this case it was a matter of good | | | | simply buy a short ETF. |
| timing...bad stock selection. In trading stocks I've | | | | Stock ETF's can be bought on margin, like other |
| given up on finding the best stock to trade, and have | | | | stocks can if you want some leverage. |
| in effect eliminated specific risk. I now trade stocks | | | | If you want to double or triple your profit potential |
| called ETF's. Here's a basic investment guide for | | | | and risk, you can do this simply by trading leveraged |
| those of you new to trading stocks who want to | | | | ETF's. For example, (UYG) gives you double the |
| simplify your trading life. | | | | action in financial stocks, and (FAS) gives you 3X the |
| ETF's (exchange traded funds) trade as stocks on | | | | action. |