Apple Is Down 30% in 3-Months! Stock Investing Basics to Know if you Should Buy

aaplYou can’t talk about stocks these days without mentioning Apple. The trendy tech giant is the largest corporation in the world and its stock is up 26% this year and 13,690% over the last 10 years! Despite the release of the iPhone 5, however, the stock is down 30% since September! So, what next? Should you buy it in your IRA? Should you even be investing in stocks?

Here are some important points to consider:

What the hell is a stock? When you buy a stock, you are buying a small fraction of ownership in a company. Apple has almost 1 billion shares of stock available in the market so if you bought one share, you would own one one-billionth of the company.

Focus on the Fundamentals: When buying a stock you want to find companies that you understand and that are making money, growing consistently, and that have enough money in the bank to pay its bills. These are called the company’s fundamentals. Apple, McDonald’s, and Coca-Cola are examples of fundamentally sound companies. Keep it simple.

Cash in on Dividends: When a company makes money they can either reinvest back into the company to grow, or they can pay it out to the shareholders in the form of a dividend. A dividend is a payment that represents your share of the profits in the company. Look for companies with consistent and growing dividends and reinvest them back into more stock to increase your returns over the long-term.

Buy-and-Hold: The best advice we can give to any stock investor is buy companies that will be around forever and hold on to them. Investors have proven to be really, really bad at timing when stocks will go up and down, and since you are human, you’ll be bad at it too. If you pick quality companies, with good brands, consistent growth, and a healthy dividend, hold on to it and come retirement you’ll be happy you did.

As we’ve written before, you don’t need to pick individual stocks yourself, but it’s important to know what they are and how to avoid the hype of the bad ones (cough-Facebook). The more you know the better equipped you are to invest for your future

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