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How To Invest In Stocks

How To Invest In Stocks

17.10.2020

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Investment in companies’ stocks a convenient and simple tool for making money, which is available to anyone who has a sufficient amount of money and not just for financial brokers and businessmen.

In practice, it looks like this: companies need additional finance for their development or expansion. Then they attract investors who provide the necessary amount, and in return, these investors receive the stocks that confirm their ownership of some part of the company’s property, the share.

The total amount of shares (stocks) issued is equal to the authorized capital of the enterprise. The share of each shareholder is determined by the ratio of shares acquired by them to their total number. At the end of a quarter or a year, the results and accounting calculations of the company’s profits are summarized, which are divided in proportion among all shareholders. These payments are called dividends. Therefore, each one, who wants to invest in stocks, is making the right choice.

Types of stocks

In case, when you want to invest in stocks, remember that these stocks can be the following ones:

  • Ordinary — the most common — give the right to participate in the life of the company directly, but do not guarantee regular payments;
  • Privileged, the possession of which in most cases does not allow managing the company, ensures the receipt of permanent dividends on the basis of annual profits.

How do you earn on stocks

Most participants in the stock market do not own the necessary number of shares, which would allow influencing the further development of the company. But even relatively small investments can make a profit. When you invest in stocks, you can get income in two ways:

Dividends

This is a part of the net profit of the enterprise. The size of payments is determined by the results of the final calculation of the received revenue after tax at the investor counsel. The amounts may vary depending on the decision taken at the meeting.

Securities trading 

The stock’s price in the market is constantly changing, so there is always the opportunity to buy stocks cheaper, and with a sharp jump in its value, it is possible to sell it for a higher price. As a rule, the waiting period for an increase in the value of securities ranges from six months to a year.

Investing in stocks — where to start

Professionals of FinanceWorld advise everyone to start with futures trading as this type is subject to the smallest commission. Having understood the basics of the stock market mechanism, one can proceed to more serious financial transactions and instruments, for example, binary options or Forex. Each market participant chooses exactly what brings him the maximum profit.

Choosing a strategy

The two most popular trading concepts are passive investing or trading strategy. To invest in stocks successfully, you must learn the basic rules and principles of market regulation.

Basic conventional strategies

  • Short-term — the period of closing the transaction is several weeks;
  • Medium-term — the transaction is open for several months;
  • Long-term — positions can be opened for a year or more;
  • A scalper which is based on a large number of transactions during a trading session — from seconds to several hours;
  • Swing trading — a certain number of stocks transactions that take place over a period of weeks;
  • Day Trading — positions are closed in the interval of one trading session, but in a fixed period: in a minute, an hour, or a couple of hours.

The best start

So, the best thing you must do when you decide to invest in stocks is the search for a broker. Here the choice lies entirely on the newly-made trader. The company means much as well.

The ideal investment company is the one whose stocks are now in a recession, that is, they are sold cheaply. The main thing is to correctly assess the liquidity of the enterprise. It is necessary to buy stocks only from the company that has the potential for growth and development — for the further sale of assets when they rise in price.

Another option is to receive dividends. In this case, you need to buy shares from a proven and reliable company that can guarantee stable payments of a percentage of income.

The main advantages of such earnings

  • You can trade on the stock exchange even with a relatively small start-up capital;
  • Shares of the world’s largest concerns are highly rated. Thanks to their absolute liquidity, such securities can be sold at any time, instantly turning into money without any loss;
  • Any person can trade on the stock exchange with the help of brokers provided that he has at least the minimum capital to invest in stocks;
  • The speculative method of earnings is safer than others.

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