What is a Stocks Portfolio?

Have you ever heard experts on TV talking about a stocks portfolio and wondered what exactly that is? Well it's quite a simple concept. A stocks portfolio is simply the collective term for all the stocks that you own. Every investment you have made can be thought of as being in one big group which is your portfolio. Have you ever heard the term diversify your portfolio? This is simply in reference to the logic that you shouldn't put all your eggs in one basket. You want to keep the stocks you buy spread across different companies and industries so that if one takes a hit the rest of your shares won't be affected by a sharp decline in value. For example if you had a large amount of stocks three different airlines and one has an accident all three will no doubt be affected in their value. Industries tend to be affected by events like this even if it isn't the company you own who had the accident. Investor confidence is fragile at the best of times and all those affiliated with the airline industry would feel the after shock of this. So to diversify your stock is simply an insurance policy you can take out yourself to make sure all your bases are covered.

Warren Buffett has a slightly different opinion to diversifying your portfolio. Rather than buying up stocks from 20 different industries he has tended to focus on those he is familiar with and ensure you're buying in to good companies in the first place. Anything major like my airline example above won't affect the companies profitability in the long run and can be seen as a minor blip in the chart. I've also read a few articles where he's recommended buying more stocks in a company you already own rather than branching out and investing elsewhere. Now by this I'm sure Warren Buffett isn't recommending that you don't diversify your stocks, simply that if you have a good company there's no reason not to invest more money in to it. We are after all trying to make money from buying stocks and shares. There's a lot of websites out there from people claiming to have stock guru portfolios and I'm not even sure what that term is. I'm always wary of taking advice from someone who's claiming to be a stock guru, the proof is in the pudding as far as I'm concerned. I'll listen to people who have proven themselves over decades such as Warren Buffett who could actually claim to have a stock guru portfolio!

I've recommended quite a few times on this site about trying out fantasy stock markets online to get a feel for buying stocks for beginners. It's a great way to try out the industry and see if you're getting the hang of it without putting any money out. No risk attached. It's also a great way to get your head around the idea of having a portfolio and managing it, it would be a mock portfolio or practice portfolio. Most of the fantasy stock market games will let you browse stocks by industry and you can then see if you've bought stocks which covers a wide variety of industries protecting you from any downturn. This way if you diversify your stocks you won't get hit across all your holdings. If you do eventually decide to buy stocks online for real you'll be able to manage them in much the same way. Many of the online brokers provide excellent stock management software where you can get at a glance figures and stats per industry. Remember Warren Buffett's tactic though, don't invest in an industry you don't have any knowledge of! It makes it much more difficult to work out if it's a valuable company to invest in. If you're interested in this have a look at how to work out the intrinsic value of a company.

Fantasy Stock Market

Lets face it everyone’s sick of working for a living to the idea of making a killing on the stock market appeals to most of us. So how do you buy stocks. And how do you buy stocks online making enough cash that you can quit your job and live off your stock market picks? Is your imagined type of work to take it easy, sit back and watch the profits role in while your business grows with little involvement from you? Making money from the stock market can make these dreams come true. Beginners can make money in the stock market. Trading stocks is not just for a chosen few.

With the current economic climate there’s never been a better time to start buying stocks and shares. There are a lot of bargains out there. There is of course the question of how to invest in the stock market. The great thing about buying stocks online is that you can now practice without using any of your own money. There are what’s known as fantasy stock markets now online where you can sign up for a free account and use your knowledge you have learned from my previous posts to buy stocks. This will cost you absolutely nothing but it is a good way to learn techniques at work. You can also take risks with which stocks to buy safe in the knowledge that you won’t lose any of your own money. If you want to try the Warren Buffett style of investing then go ahead in the fantasy stock market. Try for yourself to see if these techniques work.

If you look around the Internet you’ll find stock market investment advice all over the place. Do you really want to take a risk with bad stock market investment advice and lose your own money not to mention the time you’ll waste. Fantasy stock market trading is excellent to get a feel for the market and find ways you can make money and make the stock market work for you. It is so important to understand what the market is- the stock market-and how this market operates. If you don’t understand the market there is absolutely no point in throwing your money away. Trading stocks in a fantasy stock market will act as a good guide. It will let you know what you do know and what you still have to learn. Your results should answer this question. The simplest definition calls the stock market as the public market where stocks and derivatives are traded at the set price. There are those securities that are listed on the stock exchange that are traded in private. All kinds of people trade in the stock market including individuals (no doubt like you) and private companies who trade in bulk and perhaps work for investment firms building hedge funds. These investors then indicate whether they wish to buy or sell the stocks they have or the stocks they are interested in buying.

There’s also different places that stocks and bought and sold. You may have seen the mayhem of a stock market trading floor on TV. Lots of paper flying around and people shouting. Trades are bought and sold verbally on the trading floor. What’s becoming more popular nowadays is the virtual trading environment where stocks are bought and sold online. Exchanges can be considered as physical locations and there is also the virtual exchange. The world's largest physical trading market is the New York Stock Exchange where listed securities can be traded. The typical orders will start from traders going to the floor broker up to the floor trading post specialist that trades the order. This specialist matches any buy and sells orders, and when trades are made this is reported on the tape and sent to the brokerage firm who is interested in buying the stocks. NASDAQ is a good example of a virtual exchange in the US where all the trading is done online. The process is similar; the only difference is that traders are matched electronically.

The stock market is simply a place for traders to trade. Hence the market! It’s often used as a barometer for the way an economy is performing. Queue pictures of traders with their heads in their hands on a bad day. It is much a part of culture as anything else today. There have been numerous movies made of it notably the Oscar winning Wall Street starring Charlie Sheen and Michael Douglas as the infamous Gordon Gekko which is well worth a watch.

Berkshire Hathaway

Yes I'm posting more about Warren Buffett! But then How to buy stocks for beginners would not be the same without constantly mentioning the daddy of all investors. Anyway, Berkshire Hathaway so if you're trying to learn how to invest like Warren Buffett then why not take a look at Berkshire Hathaway's holdings. The shear mention that this company is interested in another is enough to make a share price rocket in the stock market. So as a beginner what can you tell from looking at these companies? For a start you can see that Warren Buffett always stuck to the rule of investing in something you know or can easily understand. He doesn't own any tech stock because he doesn't know anything about it. He does own a large number of stocks in Gillette and Coca Cola. How hard is the razor and soda business to understand? Not very...hence he bought them. He did of course split up the stock to A and B stock to let others who don't have quite as much cash to jump on the Buffett gravy train. I've resisted the buffet gravy tie in I bet you're glad.

So if you fire up any tool I keep mentioning yahoo finance but anyone will do and look up BRK.A or BRK.B that's the stock symbols by the way, you'll be able to see a breakdown of the company. The stocks are quite expensive. Then he is very successful at this. You can also check out the Berkshire Hathaway website which is absolutely atrocious I have to say. This free rubbish from Blogger is a better template. I can't quite claim to have the same wisdom to bass on about how to buy stocks. That's the great thing about the Berkshire Hathaway site, you can read the letters than Warren Buffett sends out to his shareholders without being one yourself. . Like I said earlier, he's the best in the business so why not learn from him? I have to mention Charlie Munger as well. He's the Vice President of Berkshire Hathaway and widely regarded as Buffett's partner in the stock market. He's also just old. Anyway, he's someone worth looking up as he applies the same techniques that Buffet does taught by Ben Graham all those years ago. There's no point in telling you how much Berkshire Hathaway is worth at the moment because the nature of the business makes it clear it'll be out of date as soon as I post this. There's so much information out there on basics of stock market for beginners it's hard to know where to start...or stop.

In short, read up on Berkshire Hathaway and Charlie Munger. End of lesson for today folks!