This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Five Rules for Buying Stocks

Stocks in this article: AMZN BRK WFC

1 - Buy What You Know

Each investor forms his or her own trading strategies and rules for buying stocks based on personal goals and risk tolerance. And similarly, each investor buys and sells stocks and mutual funds based on what makes sense to them, right?

Not necessarily. The problem is that many investors fall victim to the latest fads on Wall Street and are eager to buy the stocks everyone else is talking about. This is how traders got taken for a ride by the tech bubble, as folks piled into stocks that hadn't yet turned a profit and with no realistic way to make money.

Remember Flooz.com, which pitched a kind of online currency that would serve as an alternative to credit cards? It sounds like a crazy concept, but somehow the company raised somewhere between $35 million and $50 million from investors and enlisted a few retail giants such as Barnes & Noble (BKS) to join in.

But at its core, Flooz was a glorified gift card company with limited partners. Three years after going public, Flooz was bankrupt -- which shouldn't have surprised anyone who took a hard look at the company's business model.

On the other side of the coin, take Amazon.com (AMZN) and its Kindle e-reader -- heralded by early adopters as a revolution in book publishing.

They were right. AMZN stock is up 130% since Jan. 1, 2009 -- compared to a mere 15% in the broader market. If you know anyone who bought a Kindle during the last two years and listened to them rave about it, chances are the success of AMZN stock is no surprise to you.

Never under estimate the power of your personal experience. If you notice consumer trends or new product with big potential, chances are other folks will too. This will help you anticipate investment trends and profit from them, instead of chasing other people's stock picks.

2 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs