You’ve probably heard that investing is a great way to make make money, but it’s not as simple as it sounds. If you want to invest in stocks, you need to do your research if you want to ensure that your money grows. So how does the investing process work?
Well, technology is making it easier and easier to invest. The new advancements that we’re making are exciting. From robo-advisers to online investing, there’s a lot more that you can do. These new methods bring down the “complicated” world of investing, by saving time and money and making it more accessible.
When investing in stocks, you may think that you’ll have to pay some outrageous fees or commissions. But in reality, it’s possible to do all of this for free. It all depends on what you’re most comfortable with and how much effort you’re willing to put in. There’s a lot to consider, so we’re going to help you through the process.
What are Stocks
Stocks are shares of ownership of a company. They are flexible in nature, giving you the ability to buy and sell as you please. When you buy them, you own a part of the company. The main goal of buying stocks is usually to make a profit. If the company sees increases in sales and market share, then the value of the company, and by extension your stock, will increase. If you sell your stocks after the company has increased in “value”, you will have made a profit.Like any other business owner, your return will depend on how well your company is doing. This is especially true over the long term.
Stocks are popular because they’re a relatively easy way to make money. However, not many people use the stock market to its full potential. Many people are afraid of the “risks” that come with investing in shares. While it is possible to lose money, making well-informed decisions can ensure that you’ll make more than you lose.
If you want to invest in stocks, you may come across some key terms in your research. Don’t just skip them, because they are vital to your understanding. Many people rely on financial websites or news to comprehend how the stock market works. To ensure that you get the most out of these sources, it’s important that you have a good grasp of what it all means.
Earnings per share. This is the amount of the company’s profits that are paid out to stockholders.
Dividends. Some stocks will pay you dividends. This is a sum of money that a company pays its shareholders on a regular basis.
Moving average. This is the average price per share of a company over a specific time frame. This number helps determine whether the current price of a stock is good or not.
Market capitalization. This is also known as the “market cap”. This is the total value of all of a company’s shares.
Beta. This measures how volatile a stock is in comparison to the market as a whole. This can help you determine how risky an investment is. Beta numbers below 1 are usually less risky, while beta numbers above 1 are usually more volatile.
Return on equity. This is the amount of revenue that a company generates, relative to the amount that was invested by stockholders. This is useful because it can help you determine with companies are the most profitable in their industries.
Important Things To Know
Fluctuations. The stock market is in constant change. People have been trying to predict it the market for years, but it can’t be done entirely accurately. Throughout the day, stock prices rise and fall, so don’t freak out if your stock goes under for a bit. It’s important to look at stock investing in the long term.
Inflation. Changes with inflation will effect your eventual payout, so remember to be cognizant of how your money is valued.
Diversification. You’ve heard it a million times: don’t put all your eggs in one basket. The same applies to the stock market. It’s better to have a diversified portfolio because you don’t want to put all of your money into one investment and end up losing it all. Your investments should range from different kinds of stocks to different kinds of bonds and more. How you will allocate your money will depend entirely on your risk tolerance and on your investing time frame.
Dishonesty. Unfortunately, this is something that you must worry about or at least be aware of. There are a lot of firms that advertise that you can “get started with only a few dollars”. The trick? They end up charging you huge fees based on the percentage that you invest. So stay safe and stay aware. Where there is money, there is greed. And where there is greed, there is dishonesty.
Feelings. People’s feelings and perceptions of a company can influence how the company’s shares are valued. It’s important to keep this in mind because the prices that you buy and sell at will determine how much you make.
Types of Investments
It’s important to know about different kinds of investments, so that you can determine which one works best for you.
Individual stocks. This is the type of investment that usually pops into people’s minds first. A stock represents partial ownership to a company’s assets and earnings. Basically, someone who invests in a corporation owns a part of the company. Ownership is determined based on how much stock a shareholder owns.
Mutual fund. Individual stocks aren’t the only things that you can invest in. You can invest in a mutual fund. This is a type of investment that allows many people to pool their money together to buy shares in different companies. The benefit of a mutual fund is that it is usually lower risk. However, returns tend to be lower.
Step 1: Do Your Research
Make sure to set goals. It’s important to set goals and spend some time considering what exactly you want out of investing. Do you want to pay for certain expenses? Do you want to get out of debt? Are you looking to make more money to continue investing it or save it? Is the money going to stay there or are you going to buy and sell often? To start, it might be easier to quantify your goals in terms of time and money. For example, you want to pay off your house within ten years, so you need to make a profit of at least $100,000 within that time.
Most people have more than one reason of why they want to invest, but they often vary in terms of priority and timing. Writing down your investment goals can help you streamline you investment plan.
Determine your risk tolerance. Some investors like to play it safe to avoid possible losses. Others try to master the market, trying to balance their high and low risk investments in order to capitalize on profits. However, when investing, there’s no guarantee that you’re going to make money. In fact, you could even lose it all. Therefore, determine how much of your money you’re willing to say goodbye to.
Financial adviser. If you’re unsure about your risk tolerance or how much you’re willing to spend, it could be beneficial to see a financial adviser. These people can give advice on investing and finances. They might be able to give you a better idea of what you should do.
Set time frames. Your goals will probably determine how long you can afford to have your investments in place. However, it’s important to remember that the longer you keep your investments, the greater the possibility that you will get better returns.
Look at what you have to work with. Do you have debt that you need to pay? Do you have any ongoing bills? Make sure that you have enough to invest with.
Step 2: Open a Brokerage Account
Nowadays, you aren’t limited to in-person interactions when investing. Technology makes it possible to buy stocks online or even from your phone. Once you’ve determined what you want out of investing and what you want to invest in, you can start by opening a brokerage account. There are many different brokers to choose from so you’re going to want to find someone with a Series 7 license or a registered representative. If they have one of these, this means that they are qualified to sell securities and provide investing advice.
Online brokerages. If you’re going to be investing online, make sure that your brokerage is trustworthy and reliable. According to stocktrader.com, some of the best online brokerages are TD Ameritrade, Fidelity, and E*Trade.
Step 3: Pick Stocks
There are tons of stocks to choose from, so it’s important to make a wise decision. Remember that when you buy, you are going to have partial ownership of the company. Therefore, make sure to do your research and check up on the company’s performance. Even if you don’t know much about investing, you could learn a lot from people who have made it in this business. Books can be super helpful and teach you important tips and tricks.
Just remember that your final budget will depend on how many shares you are buying and how many you want to buy.
Step 4: Buy Stocks
Now you’re finally ready to go out and invest. To start, there are few different ways to buy. For example, you can purchase with a market order. This is when you submit a request to buy a share at the best available price. However, even if the price goes up or down, your purchase will still go through. So if the price of the stock sky-rockets, you might be buying more than you bargained for.
Luckily, you also have the option of submitting a limit order. This type of order sets a limit at the price that you’re willing to pay for certain shares. For example, say a share is currently priced at $10, but you are only willing to pay $5. If you submit a limit order, your sale purchase will only go through if the stock goes down to $5.
With all the orders that you can place, it helps to have a broker because they can manage your investments. Without a broker, you’re the one that has to make and submit all of the orders. It’s also beneficial to have one because they can offer investment advice that could end up making you more money.
If you bought any stocks after reading this, congratulations. You’re now the partial owner of a company! You might be tempted to constantly check on your investments, but remember that the stock market is always fluctuating. Don’t worry if your stocks have gone down a few cents, because it’s the long term that matters. On the other hand, if you haven’t invested in stocks, but you’re reading this: what are you waiting for? There’s a lot to be gained and a lot to be learned. As always, thanks for reading. Please share this content if you found it useful!