Knowing how much you should invest in the stock market is incredibly important to figure out for your own financial sake. We’re all different in terms of our age, net worth, and risk-tolerance; A simple “invest 50% of your net assets in the stock market” recommendation is too vague for anyone to go by. So this article will show you what’s important when it comes to deciding how much money you should invest in the stock market.

Ultimately only you can decide what the right amount of money to invest in the stock market is. Nonetheless, these are the factors you need to consider when deciding how much of your money should go into stocks.

Take into Consideration:

Your Age

The younger you are the more aggressive you can be with your investments since you have more time to earn any money back that you may lose in the stock market. Retired and soon to be retired investors don’t have this luxury and have to look at investing much more cautiously than say a 25 year old. Since retired individuals usually rely on the dividends of their invested money to sustain their standard of living, they need to invest less to lower their risk.

How Aggressive You Wish To Be

In general, the more risk you take on the higher your potential gains and losses are. The more money you invest, the more risk you are essentially taking on (even if you invest in low risk stocks). So ask yourself what your goals are for the present and for the long term, and determine how aggressive you are on a 1-3 scale (1 being non-aggressive, 2 being neutral, 3 being aggressive).

How Good of An Investor You Currently Are

I’m a firm believer in the more experienced and skilled you are, the more you should invest (up to a certain point). In my case, I only invest 25% of my net assets. However as the years go on, I will consider myself worthy of taking on more risk given that I have more knowledge, skill, and experience under my belt.

Always remember:

Don’t invest money you can’t afford to Lose

The money you invest in the stock market should never, ever, ever, ever be money that you can’t afford to lose. Regardless of how much of it is invested, if you invest with money you need to sustain your standard of living you are putting too much risk and pressure on your portfolio and yourself.

Invest only as much as you are comfortable losing

While we all hope that we are successful in our investments, it is unrealistic to assume we couldn’t possibly lose every cent we put in. So when asking yourself “how much should I invest?”, remember that you need to be more comfortable with the fact that whatever amount of money you invest can possibly all be lost. Not only will this help you determine the level of risk you want to take on, but it will also keep you humble about your investments.

With all of this taken into consideration, you should have a rough estimate of how much of your money should be invested. However please speak to a non-commission based financial advisor/financial planner if you still feel unsure of how much you should invest.

Imagine a stock that falls fifty percent one day and rises fifty percent the next day. Seems like you’d have broken even, right? Wrong. This is the beauty of mathematics, and it occurs in the stock market all the time. While this shouldn’t be a significant problem for your investments, it can often be misleading and confusing when researching and analyzing stocks.

Let’s use the example of a recently volatile stock known as E-Trade Financial (ETFC). The stock price experienced a large sell off and dropped to $8.59 per share, a 58.7% drop. The next day a rally occurred in the stock market and E-Trade’s stock soared up 40.9%. This left the stock at $5.00 at the end of the day. This is a key example of how the percentage mathematics used in stock prices can easily be misleading to casual investors.

Now let’s break down this problem in simpler terms. Suppose you bought XYZ stock at $10 per share. It remains around $10 per share and suddenly it falls 80% one day due to a sell off and ends the day at a meager $2 per share. The next day, the aggregate stock market sentiment is the stock was oversold, so a rally occurs and the stock soars up 50%. If you were a long term investor during all this madness, you’d still be down significantly. A 50% rally in a $2 per share stock will only result in a $3 stock price. Which means despite the face value of 80%-50%=30%, you are actually down 70% on your investment of XYZ stock because the price per share ultimately went from $10 to $3.

Investing in the stock market is confusing enough already to the amateur investor in today’s conditions; So always keep this in mind when you research and analyze stocks as this is an easy mathetmatic occurrence to forget about or overlook.

It’s times like these that I realize that the only thing I know is that I know nothing. I learned it first when I started investing in the stock market over 2 years ago, and I was reminded yet again when I decided two months ago to start my own ‘how-to’ investing website.

Now while I wouldn’t consider myself a computer and internet guru, I am far from being computer illiterate. Infact I’m typing this article from a computer that I built myself. So when I decided to start an investing website, I thought given my respectable knowledge of both computers and the internet, that I wouldn’t have too many problems; I was very wrong. Here’s what I’ve learned about having a blogging site in the past two months since I opened up the site:

Having a good domain host is essential
I started out on a certain well known website host (company name withheld) and was plagued with problems from the very start. It ultimately came down to the fact that they offered an inferior service at an overpriced cost. I experienced everything from url problems, to not being allowed to access general files in my own account, to even discovering that the majority of all of my problems came down to my inferior host. I have since switched to Bluehost for my web hosting needs, and am very happy with them.

Simplicity is more effective than overwhelming complexity
When I first started customizing the theme for this website, I wanted to add all kinds of things such as displaying recent comments, recent blog readers, current users online, my website rank, etc. Similar to the early 1990’s when web designers just vomited up code everywhere and decided to call it a website, I was going for overwhelming complexity instead of effective simplicity.

When I decided to cut down everything I felt wasn’t necessary to my site, the pages became smaller in terms of file size, and ultimately became more effective. I realized that with less options available to the reader, the more effective the available options will be. This helped my readers find things more easily, as well as increased the advertisement click through rate on my site.

You Really Will Get Out What You Put In
I’ve noticed that articles I write that provide genuine value to readers always reward me in return. If I write an article that a reader believes is really something useful, he will bookmark it on a social networking site and then others will view my article. Another example is when I submit a quality article to a blog carnival, I have a good chance of being an editor’s pick and receiving more traffic.

Now every time I write articles, I try to pause and ask myself, “Why would I be reading this? Is there anything valuable in this article”? Although this usually results in common attacks of writer’s block and less frequently posted articles, the articles that I do end up publishing display quality over quantity material.

Blogging is hard, but making money from blogging is even harder.
The idea of creating a website and having passive income is very attractive yet very misleading in terms of it’s difficulty and success rate. While there is no official statistics, the generally agreed upon average for click-through rates for advertisements on websites is around 1 in 100 views. So if you get 100 views on your site in one day, you’ll end up with one advertisement click. One click usually amounts to around fifty cents.

So if you want to actually make considerable amounts of passive income from your website, you’re going to need significant traffic to achieve that goal. Using our rough averages listed above, if you wanted to make $1000 dollars per month, you would need to bring in 200,000 views per month. In my second month with this website, The Investor’s Journal brought in a mere 1,410 views. Now that is a reality check for all you passive income wanna-be’s.

The upper-center of the page is generally the hot spot
After large amounts of research and some experimentation, I’ve concluded that the upper-center of the page is the hot spot for reader attention. If you want to make money off your website, it’s best to have ads that are placed in that section of the site. This isn’t true for all sites, but in general it is the first place a reader looks. Further proof of this argument can be seen in just about any major site with advertisements in their articles; the advertisements are always placed in the upper-center part of the page.

Competition is rampant, therefore “Content is King”.
Many people say how the key to success with a blog is to have great content. It is definitely true that good content is what will bring you readers, but there’s more too it than that. What most people never mention is how much competition there is out there. You need good content not just for the sake of keeping readers, but also because the readers have such a wide range of choices to get similar information. My niche of ‘how-to-invest blogging’ is less crowded than other niches, but there are still plenty of sites just like mine out there.

Forgot about the little things and Just Focus on Content
In the beginning, I was so concerned about the site layout, which ad formats were most effective, what color scheme I should use, etc. that I lost focus on what really mattered: writing quality investing articles. After I got back on track I started writing more frequently and with less occurrences of writer’s block. I started to realize that while site layouts and ad formats are important, they matter very little in comparison to the content that is shown on the website. It’s not the layout that has people viewing my site, it’s what I have to say in my articles.

Learn CSS or enjoy having no control over your site’s appearance
When I first created my website, I installed WordPress and had the default theme loaded. Even when I was a blogging virgin I could tell that the default wordpress theme wasn’t going to cut it. I eventually looked around for some themes I liked and applied them to my site. Then came another obstacle: I have no idea how to read, edit, or understand any of the CSS code in the theme. It took me at least a week of trial and error to get the hang of CSS and other little codes in the theme’s design.

Of course I could have just hired a professional to do all the work for me. However I strayed away from hiring someone to create a design for my website for several reasons. First, it is going to cost a decent amount of money to have someone design my site. Second, with the design being created by myself, I am more self-reliant and can easily adjust the layout to my liking without having to contact some hired designer again. Third, I am motivated to make this website successful, so I have pride in knowing I designed my site by myself and didn’t have to hire anyone.

Conclusion
Just like anything else out there, blogging is much more difficult than it originally seems. The amount of knowledge a blog author has to have in both websites and their topic of choice is what ultimately leads to most blogs being abandoned within the first year. However I am not as easily discouraged by the difficulty of blogging and its many obstacles that it throws at me, and I hope ten months from now I can write an even more in-depth article called “What I’ve Learned About Blogging After 1 Year”.

Keeping yourself up to date with daily stock market happenings is necessary if you wish to be successful and grow your money. It is a rule to invest by that I strictly adhere to, and you should too! However this doesn’t mean you need to read every tidbit of information that occurs every day in the market. On an average day, reading a daily summary of stock market news is sufficient enough to keep up to date with the stock market. On other days when there are important events such as earnings reports or fed meetings, you would benefit from keeping up with the stock market on a more frequent basis than just after the closing bell. Regardless of whichever degree you wish to stay informed, here are some easy ways to follow the stock market on a daily basis:

Watch CNBC
In particular “The Closing Bell” (4pm Eastern Time Zone) on CNBC recaps the most significant daily events in the stock market, the economy, and any important variables that affect the two. However if you have the time to watch a few hours of CNBC on any given weekday, I highly recommend you sit down and immerse yourself in the stock market news and discussions displayed on CNBC. You’ll not only catch breaking news, but you’re bound to listen to exclusive interviews with mutual fund managers, hedge fund managers, stock market analysts, and other individuals who have strong influence over the stock market.

Subscribe to a Financial Media Newsletter
Find a reputable source for financial news and get yourself a subscription. Some financial media sites even offer their articles for free. I use the Wall Street Journal Online, but there are plenty of great sources for financial news such as Investor’s Business Daily, MarketWatch.com, and TheStreet.com.

If you have the option between an online subscription and an actual newspaper subscription, choose the online edition. You’ll be able to get much more up to date information as opposed to the newspaper edition. Plus if there is any after-market activity or breaking news that occurs after the final version of the newspaper goes out, you’ll basically be missing out on that late breaking news.

Keep a News Ticker Running on Your Computer
There are many ways to have a stock market news ticker running on your computer. The easiest way is to use whatever tools your online broker has in the form of a news ticker and just leave it running in the background. Periodically check up on the ticker for any major news that can affect the stock market and/or economy. There are also plenty of programs available for purchase out there that will also report stock market news, but I would highly recommend using your broker’s own tools for a simple task such as retrieving up the to the minute stock marke news. It will keep things simple and most likely will be cheaper than purchasing some independent software.

It is possible to never fail in the stock market. So what is the catch, you ask? The catch is that you never give up on the stock market, that you don’t ever get discouraged, and that you believe in yourself while simultaneously never letting mistakes happen without learning from them. If you want to succeed with your investments, you need to learn from your failures. If you can do that, you ultimately can never fail in the stock market.

Having failed investments in the stock market is a common thing, and we all get hit by major losses every once in a while. So the title of this article can be considered somewhat misleading, but it all depends on your perspective. If all you do is lose money in the stock market and don’t learn why you are losing money, then you truly are failing. However if you lose money in the stock market but learn from your mistakes, then you aren’t failing, you are getting an education. You will have plenty of bad investments in the stock market, so you might as well capitalize on them and attempt to learn everything you can from them. After you figure out what you did wrong, consider creating a list of rules to invest by so that you don’t ever repeat your mistakes.

This is where discipline, dedication, and confidence in yourself are crucial. Stock market failures will always make you doubt your ability to successfully invest on your own. But you cannot be discouraged, and must always remember that with every mistake you make, you are now wiser and more experienced. There is no such thing as failure if you don’t give up.

If you learn from your mistakes and stick with your goals, you will ultimately be successful and can never fail in the stock market.

If someone were to ask what I thought was the best method to make money in the stock market, investing or trading, it would not be an easy question to answer. Both investing and trading offers their pros and cons. I personally wouldn’t consider myself an investor or a trader. My own method to achieving portfolio growth is mainly short term investing along with some long term investments and and even smaller amount of trading.

My opinion on the matter is that as an amateur in the stock market, you should consider trying all forms of wealth growth until you find what works for you. I’ve been in the stock market since 2005, and here’s what I consider to be the pros and cons of investing and trading.

Investing

Pros:

• Statistically you are more likely to succeed than traders are in the long term
• More likely to have consistent percentage returns per year than traders are
• Less time consuming and psychologically less stressful
• Less commission fees than trading

Cons:

• Lower percentage returns in the short term
• Easy to lose interest due to lack of involvement required. Usually leading to poor portfolio performance.

Trading

Pros:

• If successful, a trader’s percentage gains are typically higher than investor’s
• There is always money to be made somewhere in the short term
• Builds even more discipline than investing does (assuming you are successful)

Cons:

• High broker fees due to commission being taken on buy/sell orders
• More time consuming and considerably more psychologically stressful than investing

Overall, I would ultimatley recommend investing over trading simply due to the fact that most individuals just aren’t capable of being successful as a trader. It takes vast amounts of market knowledge, discipline, understanding of psychological issues, and a little bit of luck to make it as a trader. Whereas an investor can simply choose a few mutual funds coupled with some fundamentally strong long terms stocks and end up more successful than most would-be traders after 10 years.

E-Trade is arguably the most popular and well known online discount stock brokerages. Boasting over 4000 employees and having a net income over 600 million dollars per year (2006), E-Trade clearly is sitting high on the list of top online brokerages. I personally use E-Trade for all of my investment needs and do recommend it to anyone who is considering opening an account with an online stock broker. Here is how it E-Trade ranks among their competition:

Site Layout – 4 out of 5
E-Trade’s site layout is effective, intuitive, professional, and easy on the eyes. Compared to some of the other online stock brokers I’ve used in the past, E-Trade easily ranks the highest in this category. Finding my portfolio’s allocation is just as easy as finding quotes for a stock.

Tools – 3 out of 5
E-Trade has powerful and easy use tools for just about everything you’d need as an investor. It has fully customizable market and trading platforms, along with other useful tools such as asset allocation, account performance, income estimator, risk estimator, and more. The only complaint I have is that some of their more effective and desired tools are not free to users unless you pay a fee or have a minimum numbers of trades per quarter.

Security – 5 out of 5
E-Trade really sets itself apart from its competitors because they offer a free SecurID product to ensure that your account stays in your protected and in your possession at all times. I love the SecurID product, it’s extremely easy to use, creates an incredibly strong second layer of protection on my account, and of course it was free thanks to E-Trade. This feature alone is enough for me to stay with E-Trade, because I like sleeping at night knowing that I have added protection on my account.

Customer Service – 5 out of 5
E-Trade’s customer service is extremely good, especially in a time where most customer service departments are full of outsourced employees who are reading off a page of specified things to say. Customer service employees are friendly, knowledgeable, and extremely helpful. I’ve made countless numbers of calls to their customer service phone number and had my questions and issues resolved instantly. In fact, E-Trade was recognized for outstanding customer service in 2007 by Smart Money (a financial magazine).

Commission Fees – 2 out of 5
This is really the only downside to E-Trade. With E-Trade your commission fees are higher than most online discount brokerages unless you make a minimum number of trades per quarter. I tend to overlook this part of E-Trade as it is obvious that the higher commission fee is definitely worth what I get in return compared to other brokerages.

Overall – 4 out of 5
E-Trade is a great online discount brokerage, and I truly believe E-Trade leads the industry with their superior tools, outstanding customer service, and ease of use for investors. Their commission fees are definitely higher than their competition, but if you want the best, you should expect to pay a little more than usual.

Have you ever played a game of poker with just chips and no money on the line? In those games players bluff, they call hands they know they have no chance at winning, and will ultimately play in a manner that displays one huge underlining problem: they don’t care because it’s not real money. Well, that’s paper trading in a nut shell.

Paper trading is usually recommended as a training prerequisite before investing/trading in the stock market. It works by pretending you own X amount of shares of Y stock that you selected and tracking your results in a set period of time to simulate being in the stock market. Paper trading is simply a waste of time though and I wouldn’t recommend anyone bother with it.

Yes, paper trading has its benefits for the extreme beginner, but it’s ability to teach you how to invest or trade is incredibly limited. Paper trading will give you a basic idea of how the stock market functions, but beyond that it just doesn’t make much sense to bother doing it. Simply put, there are much better ways to prepare you for the stock market than paper trading. Here’s why:

Builds false confidence
Let us suppose you had a rather lucrative paper trading experience. You feel good about yourself and think you’re ready to invest or trade the stock market. You open your brokerage account, and find out after a few bad trades (which are inevitable) that the only thing you know is that you know nothing. This is because paper trading is so one dimensional compared to the real thing that you don’t get much of an education.

Fails to Simulate the Stock Market
The problem here is that you just can’t simulate the stock market, or what it feels like to be in the stock market. The variables that influence the stock market are practically limitless that I find myself unable to truly explain the depth of this issue. Economic forecasts, hedge fund influences, media headlines, market confidence, etc.; Paper trading just can’t capture all of those little things that compose the stock market, and without that you aren’t getting a real simulation.

Lacks Market Psychology Lessons
This is a huge issue as well. Regardless of whether you are a trader or an investor, being successful in the stock market is largely dependant on how well you can control your emotions. If you remember only one thing from this article let it be that paper trading will completely mislead you in terms of how it feels to have your money on the line. There is no substitute for learning how to discipline your emotions than to battle it out in the real stock market.

Wastes time that could be used for real learning
If you want to prepare yourself so you can get into the stock market, buy some credible investing books and read them front to back, check out my beginner articles, and subscribe to a credible financial media newsletter/paper.  It will definitely be more time consuming than paper trading will be, but what you will learn will be so much more in depth than what paper trading has to offer.