... and why they are not the best place to put your money

Investing in the stock market is always popular - always has been and always will be, and as long as it is, people will be interested in the most popular stocks to invest in. Naturally, as with most things in this worlds there is an ebb and a flow, kind of a natural cycle to things - and this is also certainly true of the stock market. The dry days of the stock market collapses and heady days of excesses and profits in the 1980s act as testament to that.

The trouble is, when you are looking at the popular stocks to invest in, is that they are often the worst stocks to actually make money on. You would be much better placed doing a little research and finding yourself a stock or two that has far greater earning potential. Naturally, not everyone is going to do that. Beginners naturally flock to the safer sides of the pool where it is safer, but by doing so they are less able to learn to swim themselves (get the analogy there?).

Calculator (40144)

So rather than looking at the recommended stocks to buy and limiting yourself to just those few options, look a little further afield. The popular stocks to invest in are usually the more expensive anyway, and the beginner investor should never jump in and make their first trade in an expensive stock such as that. Consider the opportunities in the smaller, cheaper stocks, which offer greater potential for profit - however they also carry a greater risk.

For this reason it is vitally importnant that you do not just jump in and buy some penny stock without doing some due diligence. Research the company, the directors and their histories - see what is on the horizon for the company and the wider sector that the company operates is and then see if that is somewhere where you would like to put your money. 

In the last dowtown thanks to the GFC the penny stocks (also called small cap stocks or shares in some countries) are hte ones that (by and large) consistently returned profits to investors while the share price of the larger companies was falling. Yes, the risk was higher in the initial investment, but if you spread your money around on several stocks or even more perhaps, then you are mitigating that risk. If, conversely, you had sunk all your available capital into one of the popular stocks to invest in, then you not only would have had vastly fewer shares, but you would not have diversified your risk and therefore lost money.

Investing in the stock market is not that hard - if you follow a few basic steps. I highly recommend practice trading before you risk any of your own capital - just so you can get a feel for the market, the process, trade some stocks and get a feel for what your risk tolerances are. When you have returned a profit for a few months in a row, then go right ahead and open and fund a trading account with a broker that you trust and get trading and have fun!