You will often find that a lot of stock market traders will completely ignore all of the large cap stocks. I can understand this because they have not exactly excelled themselves in recent years thanks to markets in general performing very badly.
Nevertheless I personally believe that these people should seriously consider trading these companies because you can make some decent profits. Indeed there are a few different methods you can use to generate some very nice returns.
The first is to take a long term approach and try and emulate the investing style of Warren Buffett, who is obviously one of the all time greats. He always tends to invest in large cap stocks that are market leaders in their industries, and he has made massive profits doing this over the years.
It is easy to see why he does so well. All of his investments tend to be in companies that have long records of consistent dividend and earnings growth. So as the years go by, the earnings and dividends of his companies go up, and this pushes the share price up as well. When you add in the fact that he reinvests most of the dividends he receives every year, he clearly makes some massive profits.
This sends out the message that you can still make huge returns by concentrating solely on large cap stocks. This is particularly true if you have enough patience to hold on to the stocks for long periods of time. In other words not being tempted to sell every time the market drops off.
One other way you can make money is to look for quick profits instead of long term profits. This means trying to bank a profit in just a few weeks or months, rather than holding on to stocks for many years.
This is surprisingly easy to do when the markets are volatile because you get some big market movements. When the wider stock market falls, it drags the share price of even the best companies lower, and therefore they will often become hugely undervalued as a result of these swings.
So if you understand the financials of many of these stocks and can quickly see when a stock is undervalued, you should be able to earn some decent returns by trading them at the right time. If you don't want to trade them by opening long positions, you could buy the physical stock instead as it is perfectly possible to bank five per cent returns or more at these times.
You could also try taking advantage of overinflated markets as well. For example when there is an abnormal stock market rally, many large cap stocks can move too far to the upside and become quite overvalued. This is the time when you might want to consider taking a short position. However because stocks generally appreciate in the long term, this is often a little harder to do.
Anyway the point is that there are a few ways you can make money from trading and investing in large cap stocks. Many people will ignore them because they think they can make more money from small cap stocks, but I personally find that the bigger companies are a lot more profitable in the long run.
Nevertheless I personally believe that these people should seriously consider trading these companies because you can make some decent profits. Indeed there are a few different methods you can use to generate some very nice returns.
The first is to take a long term approach and try and emulate the investing style of Warren Buffett, who is obviously one of the all time greats. He always tends to invest in large cap stocks that are market leaders in their industries, and he has made massive profits doing this over the years.
It is easy to see why he does so well. All of his investments tend to be in companies that have long records of consistent dividend and earnings growth. So as the years go by, the earnings and dividends of his companies go up, and this pushes the share price up as well. When you add in the fact that he reinvests most of the dividends he receives every year, he clearly makes some massive profits.
This sends out the message that you can still make huge returns by concentrating solely on large cap stocks. This is particularly true if you have enough patience to hold on to the stocks for long periods of time. In other words not being tempted to sell every time the market drops off.
One other way you can make money is to look for quick profits instead of long term profits. This means trying to bank a profit in just a few weeks or months, rather than holding on to stocks for many years.
This is surprisingly easy to do when the markets are volatile because you get some big market movements. When the wider stock market falls, it drags the share price of even the best companies lower, and therefore they will often become hugely undervalued as a result of these swings.
So if you understand the financials of many of these stocks and can quickly see when a stock is undervalued, you should be able to earn some decent returns by trading them at the right time. If you don't want to trade them by opening long positions, you could buy the physical stock instead as it is perfectly possible to bank five per cent returns or more at these times.
You could also try taking advantage of overinflated markets as well. For example when there is an abnormal stock market rally, many large cap stocks can move too far to the upside and become quite overvalued. This is the time when you might want to consider taking a short position. However because stocks generally appreciate in the long term, this is often a little harder to do.
Anyway the point is that there are a few ways you can make money from trading and investing in large cap stocks. Many people will ignore them because they think they can make more money from small cap stocks, but I personally find that the bigger companies are a lot more profitable in the long run.
About the Author:
If you would like to open a trading account with a broker and start investing in various companies, you might like to read this Zecco review and this review of Trade King to help you choose.
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