Investing in the stock market is one of the best ways to create a sustainable pool of savings. Want to learn more about the basics of the stock market? Join the Online NSE Academy Certified Capital Market Professional (E-NCCMP) course at Elearnmarkets.
When searching for the best way to multiply the money you saved, what’s the first thought that comes to your mind?
A bank savings account?
Savings in a bank account only generates fixed interest income. Since there’s not much risk involved, so the earnings are also less. It is a mode to keep your money in a safe place and you don’t multiply them.
Now if we talk about Investments. That’s the first thought that comes to mind. But what kind of investments should you engage in?
If we talk about bonds, say, long-term bonds, they provide a good rate of interest income. Also, shares too are an interesting investment avenue. If you have zero experience with these concepts and you look at stocks and bonds, they may seem similar. But there’s a major difference.
Taking our discussion further, in this blog we will talk about investing in stock markets or investing in shares.
What are stocks/ shares?
Shares/ Stocks are a part of the share capital of the company which are owned by the shareholders. These shares can be bought and sold in the share market. You can trade both stocks and bonds on the market.
For beginners, stocks are the simpler alternative. That’s because you can trade with them through stock exchange platforms, such as AMEX or Nasdaq. Bonds are usually sold “over the counter.” Plus, their income potential is not as high as one of the stocks.
Now that we know what type of investment is good for beginners, let’s see: how can you start making it?
We’ll give you tips that set you up for successful stock investments in 2019.
1. First: Understand What Stocks Are
When a company sells stocks, it essentially sells parts of its business.
Needless to say, the owners will not give up on huge parts of their business. They offer a very small portion of the company’s value in stocks. So if you buy 100 shares in Coca Cola, you’ll pay less than $5,000 for them, since one share currently costs around $49. That ownership will represent a minor fraction of the total number of shares issued by Coca Cola. The number of all shares currently distributed among Coca Cola stockholders is over 4.2 billion.
By investing in stocks, you are not part of the organization’s management in any way. Ownership is one thing, and management is another. Still, you benefit from the stocks if you trade them since their value will fluctuate over time.
2.Start with a Middleman at Your Side
If you want to start doing this all by yourself, you’ll have to invest a lot of time in learning and analysis. The stock market is very complicated. To predict the movement of stocks, you need knowledge of the economies, sectors, and companies. Brokers hold degrees and have multiple internships under their belt. They also have licenses. If you plan to go down that road, you’ll have to take college courses and you’ll probably invest in writing service to help you complete them on time.
If you want to start investing in stocks without prior preparation, it’s best to do it through a middleman. Find a reputable brokerage firm and open your account. This account will give you access to the market, where you can trade shares.
You will deposit funds into this account, and the brokerage firm will invest them on your behalf. A full-service broker will trade and give you investment advice. But you can also go for a more flexible approach, with the firm serving as an interface through which you start investing.
3. Do Your Research; Stock Trading Is Not Done by Intuition
Many people approach this activity from a gambler’s point of view. They invest in a stock that feels right because their intuition says so. Unless you’re a supernatural being with an ability to see the future, you can’t predict the fluctuation stocks without doing serious research.
Your intuition will say that when the price of a stock is dropping, it’s the best time for you to buy it. But you know what? Someone is selling the stock by that same intuition. Keep in mind that if the value is declining, there’s a reason behind it. The same rule is valid for the other situation, too. If the value is rising, it may be momentary because there’s a reason behind that fluctuation, and that reason won’t last forever.
When you’re attracted by a particular stock, research the market. Why does its value change? How will the circumstances change in future? Stocks usually react to the general market environment, so you have to be aware of that factor at all time. However, the situation with a particular company is very important, too. You can’t be aware of all internal factors. But you still need to follow the latest publications from international news platforms.
4. Pay Attention to the 7 Factors that Identify Winning Investments
Investor’s Business Daily identified seven features that the top-performing stocks have:
● Current quarterly earnings – you should be looking at stocks with value increase of 25% and above.
● Annual earnings growth – if the value of the stocks increased for at least 25% over the last three years, that’s a great sign.
● New product, service, management or price high – when the company launches something new or changes something within its structure, the value of its stocks will probably grow.
● Supply and demand – if there’s an increased volume for a particular stock, its price will go up.
● Leader or laggard – you should be investing in stocks from companies that lead their industries.
● Institutional sponsorship – pension funds, mutual funds and professional investors represent the big money, which you should follow.
● Market direction – stocks respond to market trends, so you want to be aware of the general vibe.
It Sounds Complicated, But Fun As Well
Stock investment decisions are not taken on a whim. For a beginner, that’s the most important thing to understand. This is not a gambling industry; it works on specific principles that require strategic thinking and deep analysis.
Does that mean it’s not fun? OH; IT’S FUN! You’ll definitely feel the thrill when you’re buying stocks and selling them for a higher price. It’s not easy to learn all the rules, but you can do it. The important thing is to start. You can make minimal investments at first, and you’ll grow as you gain more experience.