Despite the recent fall across the world the stock market remains a mainstay of legitimate wealth building.
Millions can be made from wise investments built up over many years.
But for most of us stock market wealth is beyond our reach.
Why is that? Well for most of us we just don't know how to do it! What we should do - what we should be careful of? The aim of this article is to present a 10-point strategy to improve your chances of becoming a stock market millionaire.
Lesson 1: Be cautious.
Do not invest money that you cannot afford to lose.
Sounds obvious but you would be amazed at some of the heartbreaking stories I hear of people literally losing their homes because of bad deals on the stock markets.
So again, only invest what you can afford to lose.
Lesson 2: Diversify.
The stock market revolves around trends and fads.
Generally all markets are increasing, setting aside the odd blip of course.
But as the markets move upwards, creating wealth, individual sectors in the market can fluctuate wildly.
For example while say the Banking Sector falls, the Transport Sector may be rising.
Diversify.
So spread your risk and invest across multiple companies across multiple sectors.
As the saying goes 'don't put all of your eggs into one basket'! Lesson 3: Spread your Exits.
What do I mean by this? Well there are some stocks that continue to grow in value but over a number of years.
These tend to be the bigger companies, Fortune 500 or FTSE 200 listed.
And there are others that are higher risk penny stocks but can give you a very high return in a matter of days or weeks.
So spread your exit strategy by buying some of both to build up wealth over a long period but also generate cash quickly.
Lesson 5: Do your homework.
This is the most important rule of all.
I know of one guy who's investment strategy boiled down to running his eye over the financial pages and investing in absolutely any company who's name he liked the sound of.
That's it.
Anything at all, any sector, any company.
For the first few months he got lucky and benefited from the general upward trend in the market and even being slightly up on his initial investments.
But eventually he fell flat on his face, losing almost everything.
Why? Because the market is a complex place and if it was simply a lottery then there would be far more market millionaires than there are today.
If this is the approach you intend to take then my advice to you us forget it and buy a lottery ticket.
To be successful you need to do your homework.
This is especially important if you want to generate quick returns from penny stock investments.
If you are the academic type and have time on your hands then buy a couple of books on investment strategies.
They will show you how to interpret company accounts, understand the financial data, and how to make sense of the numerous graphs and charts professional investors use to make their selections.
Get all the stock investment advice you can.
However if you are like me and are too busy with your life and works, and find research a pain, then consider using a stock predictor service.
There are many out there, from simple tipster services in the newspapers, to the automated software based predictor services such as Robot Stock Picker [http://robotstockpicker.
com].
I find the software based predictors work best for the hottest stock tips because they can make many millions of calculations every minute - a few more than me!! Lesson 6: Be satisfied with your gains.
So when the stock has risen to a level where you will be happy with the cash, sell it.
Do not hang around too long otherwise you may lose your gain, and some more.
After you have sold, do not check the share price.
Lesson 7: Take your losses quickly.
If a stock is falling, do not try to hang on to it unless you do not intend to sell it for many months.
Set yourself a level below which you will immediately sell (its called a 'stop-loss').
For example if your stock was bought at 100, set a stop loss of say 10% which means that if the stock falls below 90, you get out quick.
This will help you to minimize your losses.
Lesson 8: Pay attention.
Regularly check your investments.
On a bad day stocks can fall very quickly, even the blue-chip companies.
I check mine every day but there again I am a naturally cautious person.
Lesson 9: Stick to your plan.
Investment is a blend of short and long-term risk.
As per lessons 2 and 3, set yourself a diversification plan, mixing some long-term big company investments with a crop of shorter term and riskier penny stocks.
And no matter what is happening in the markets, hold your nerve and stick to your strategy.
Lesson 10: Enjoy some of your profits.
Cash some of your winnings in and spend.
I tend to use my penny stock wins to buy holidays and gifts.
After all, life is for living so live it.