When you are new to investing in stocks or stock related instruments you should take some precautions. Look before you leap, these four words could sum it up when you invest for the first time you got to take into account a few things.
How much, how long, risk capacity, what is the amount you are going to invest, for how long a period you can stay invested and what is the risk you are willing to take.
These three factors should decide the financial instrument you are going to sink your money. Let me try and explain by example. Supposing you have ten thousand which you need in a years time for making some specific payment, the type of instrument that you must select is low risk and moderate returns because if the amount remains the same or is below the amount invested you will run into problems .
Let's see the second scenario, you have ten thousand and you need to take it only after three or four years. Here your choices increase you can do two things, one you can buy shares of a reputed company which you decide after you sit and discuss with your broker you should ask him why he is suggesting that particular share, one any concert news, strong fundamentals or any Govt plan in the future which is beneficial to the industry which we are considering. Once you are convinced then go ahead and invest. If you do not like taking any risk on your own and want some one to watch over your investment then invest in any mutual fund which has a good track record.
If you follow these basic common sense points you can come out a winner which ever way the market goes. The jargon long term investment comes into play around three years period and so far we know that the markets have always rewarded the patient participant.