Original post by DJKLNo it is not, sports gambling is a win/lose wager, and with horse racing you do not even get to keep some of the manure.
The stockmarket (excepting punts in the short term ) is a long play.
My criteria (except for the odd small punt)
1. Buy stocks you will be happy to hold for a minimum five years, you may not intend a five year hold but buy those that if the price moves against you will not make you uncomfortable. The stock paying a dividend helps, but high yields are not the be all and end all, a very high yield can be telling you something. Do look at dividend cover and beware companies that every year have vast exceptionals that significantly impact difference between basic EPS and adjusted EPS, if every year they are miles apart do much more digging.
2. Remember that the norm is you never lose all your money, unlike betting, usually you can exit with some of your stake returned. If you use stop losses you can mitigate the downside but you need a wide margin re volatile stocks to avoid being constantly auto sold.
3.Moving your stop loss up if the price has increased is a good way to protect some of your gains.
4. Never fall in love with a share, it is really easy to do, if you do fall in love not penny/aim stocks, they can break your heart. I have a running love affair with Shell but it is a big beast with a long dividend record, I probably always hold some as a core and buy extra if I think it is undervalued (the minus 2% this morning was such an event, it was in profit by close)
5. Spread risk, very tricky if you have limited stake, you do not want all eggs in one basket. If very restricted re money/transaction costs will be an issue, consider Investment Trusts as slow burners. I do not like unit trusts but that is possibly in the main prejudice (except re property, they are dangerous with illiquid assets, as we are currently seeing) ITs also good way to get exposure into foreign markets etc, I use them for this purpose.
6.Be careful in current market, it is very difficult to predict with the current macroeconomics/ political events (banks, property, exchange risk, contagion issues etc abound) There are very few 100% certs re economies but you do need to keep an eye on macroeconomic news and formulate what might happen if x happens-in my case, despite some study at university, I still misread market signals, so caveat emptor; remember markets can be irrational for quite a long time. (dotcom boom)
7. Never believe that because a share was once priced at X it can retest that figure if it has fallen, a past price merely tells you that at some time some people valued it at X, nothing more.
8. Understanding accounts is imho important, but I would say that, accountancy is how I earn a living. But it is helpful to be able to read published accounts (forget the five line summaries on your brokers site, delve deep)
9. Always be prepared to cut your losses, see 4 above. Be careful of falling knives, if the market has priced downward it may have good reason, ensure you understand why it has taken the view it has.
10. Despite fundamentals, P/E, Gordon Models, etc, always remember that the term profit is a vague concept, how/when an entity decides it has made a profit whilst subject to accounting regulation, is not exact. So when you look at the company with reported earnings and profits over 3-5 years dig into its cashflows, these are far more difficult to massage.
There are a loads of other things to look for, study, read, delve into accounts, look at RNS stories, use bulletin boards but with great care, watch and observe to decide who seems to talk sense and who may have other motives, watching posters from a distance over time can educate your senses before spending any money.
Also maybe concentrate on particular companies or sectors, get to understand particular markets; analysts cover a niche for good reason, it is hard to cover everything, so you ought to do likewise.
Re my own credentials, I am old (a parent) have been investing for over 20 years, the last 8 with serious money (one of my pensions now a SIPP)
You will make mistakes, you will maybe get a ten bagger (I have had one, 3.5p went to 75p, I started selling between about 35p to 45p, so far too early with hindsight, but felt better when it fell back to 3p later-Beowulf-do not touch it, not for widows and orphans)
Anyway good luck.