The stock market has many nuances that need to be understood before you put your hard-earned money in it. So if you are new in the scene and hoping to see some profit off your stock market investments, here are all the basic things you need to know about the bear and the bull.
Prerequisites of investing
It is important to understand that just like every other field, getting returns on stock market investment is heavily based on your knowledge, patience and a little bit of luck, like all other ventures. So before diving straight into it, educate yourself on things like financial metrics and stock market jargon, popular stocks and methods of selection, profitable timing of purchase and sell, trading rules and regulations, and the market’s economic relationship with inflation, fiscal budget, GDP and crude prices. You can start by following relevant news sites for reliable stock trading information.
How to invest in stocks?
Entry to the stock market is gained by opening a brokerage account. Brokerage firms or brokers have access to the stock exchange and carry out your trading activities for you. In exchange for a free, they will buy or sell stocks in the quantity and at the rate as per your instructions. It’s up to you to choose your broker wisely – some of them charge a nominal fee but are very indifferent about your profits, while others might charge higher but be of assistance regarding investments.
Things to remember when investing in the stock market
Investing all your funds in the stocks of a single corporation can earn you huge profits if the company stocks skyrocket, but in case they hit rock-bottom, which is a very common possibility, you stand to lose everything.
A wise strategy is to choose financial security over the possibility of one-time big returns and spread out your investment across different companies. It is highly unlikely that a dozen corporations will lose stock value simultaneously. So while you don’t get to see huge profits, you don’t stand to suffer huge losses either.
Investing in dividend stocks will earn you a steady income, although a small amount, over and above what you get upon selling the stocks. The bigger the company, the higher your dividend is, and probably at a stable rate.
When confused, turn towards mutual funds for investing. They are a collection of various stocks and can include other investments in it, such as bonds, metals, real estate and foreign currency.
The stock market can be the best place to make a lot of money – enough to earn you living wholly based on your investments. But on the other side of the table, you also stand to lose substantial amounts of money at any time.
Clearly, it is an affair for the risk-takers and not the lighthearted.