There is a saying that you should learn to walk before you run and in the context of investing, this is what differentiates those who make money on the stock market and those who don’t.
How people make money investing is pretty simple. All you have to do is sell stocks at a higher price than you bought them – in other words buy low and sell high. And yet, even with such simple rules, how do people still manage to lose money?
The problem with people not making money in the stock market is that they try all sorts of advanced investing techniques such as day trading and investing in penny stocks. Sure, you can make a lot of money that way, but you can also lose a lot of money as well.
The key to making money on the stock market is to have patience. Instead of betting on stocks you know nothing about like penny stocks, why not invest in blue chip stocks that are undervalued?
A lot of people invest in penny stocks because… well, they are cheap and they believe them to be growth stock picks. However, if something is worthless, is it still worth buying? Blue chip stocks on the other hand might seem boring but there are some value stock investments to be found especially in the current recession. Furthermore, there is something to be said of brand name recognition and globalization and penetrating in other markets which can turn a value pick into a growth pick as well.
Therefore, for newbies trying to get the hang of investing, it’s better that they walk first before they run and they can do so by buying some blue chip stocks. It is a safer play for the novice and this way, they can get a value and a growth stock if they pick right.