Investing in stocks is one of the most critical fundamentals of saving. Almost anyone can invest in stocks nowadays, whether a man or woman, young or old, rich or poor. You, too, can potentially make money from investing in stocks.
To invest in stocks means to buy a portion of a company’s stock, which gives you rights to that company. In this regard, you get an equal footing with all other company shareholders.
Decide If You’re a Passive or Active Investor
Before you start investing your money, it is essential to note that the stock market is not like other markets with fluctuating prices for goods and services. Stocks themselves can be considered an asset or a commodity.
If you consider yourself a passive investor who does not have much time on your hands, then it is best to invest in index funds because they involve lower costs and risks.
However, if you deem yourself to be an active investor with enough time to manage your portfolio wisely, then it is advised that you invest in individual stocks. The benefit of this method over the previous one is that your portfolio will diversify more efficiently by choosing individual stocks because all you need is to ensure positive returns from each company’s stock.
Decide on What Your Portfolio Will Look Like
If you are a beginner with no background knowledge of the stock market and how it works, then it is advised that you go through funds because they tend to be more stable than individual stocks and most importantly, there is lower risk involved.
If this is not enough for you, most funds charge a meagre fee compared to other investment methods such as trading. Suppose you do not want to lose much money when the current trend changes (when people stop wanting certain types of products), then it is recommended that you opt for index funds.
Suppose you are already familiar with the stock market and how it works. In that case, you can invest in individual stocks by picking 5-10 promising companies that you believe will grow significantly in value over time because if they do, you will make money.
Learn How to Read Stock Charts
Another helpful skill is reading stock graphs/charts for short-term and long-term investments. This way, you will understand what type of investment would work for you depending on different scenarios, whether or not the price has gone down compared to its average value over time, high demand meaning rising prices etc.
Research Your Company
You have to research the company or companies that interest you before making your investment decision. Some of the things to research might be; what industry does it work in? Is there a potential trend due to new regulations laws being passed? Look up news articles about investing in stocks and even talk to friends and family members who have worked for different companies to get a good idea of whether this company looks promising or not?
Estimate Your Risk
Last but not least is to estimate the risk of investing in this company. For example, suppose you have a friend who works for a promising technology company. In that case, the stock price will likely increase—future developments and products coming from that company because there is constantly growing demand for new technology.
Invest
Once you have researched, estimated your risk and made up your mind about the company you want to invest in, it is time to act. Sign up for an online brokerage account (if you do not already have one) and make your purchase(s).
Stay up-to-date on the News about Your Company’s Stock Price
It is always best to stay up-to-date on current events concerning the companies’ stocks and industry. It will allow you to make better decisions regarding whether or not you should sell/buy their stock, especially when compared to other investors who might have invested in the same company.
Want to have a look at the stock market? You can see it here.
