If you want to start investing, but there are many questions in your head, you’ve come to the right place. Investing in stocks is how money works for you to make you wealthier. Here is what Warren Buffett, one of the most successful American investors, thinks of investing – "…the process of laying out money now to receive more money in the future." There might be concerns about the complexity of this process, but that’s just because you’re at the very beginning of this journey and need to follow the basics of investing. It takes some time to do proper research and understand your real "wants."
Here is what Warren Buffett, one of the most successful American investors, thinks of investing – "…the process of laying out money now to receive more money in the future."
How Does the Stock Market Work?
Such assets as stocks are understood as fractional ownership in a company, while the stock market itself is a dynamic world where hundreds of thousands of investors are busy buying and selling equities every day. The equity market has a great impact on the economic growth rate of a country. It enables companies to gain profit and expand their areas of activities. If a company issues fifty thousand shares at the price of $13 a share, then a company receives $650,000 as capital to bring its business ideas to life. Why would a company offer its shares? Well, borrowing money is not an option here since the company simply avoids being charged for debts.
And what about investors? Buying equities is a great way to get profit from publicly listed companies. There are two ways of how an investor can benefit from buying stocks:
- Dividends. That involves an amount of money the company pays a shareholder (investor) to share its profits.
- Selling stocks. If the equity price has increased from its buying price, then it makes sense to consider selling it. Let’s put it this way, if an investor bought shares at the price of $15 and it increased to $30, then an investor got a 100% profit by selling his/her shares.
Investing in Stocks for Beginners
Buying stocks isn’t rocket science if you follow the recommended steps and prioritize discipline. You’ve just made a decision to become an investor; that’s the first step. Let us guide you through the next ones that will help you start investing in stocks:
Define your investing approach
It all comes down to your individual preferences. You might be more inclined to analytics, or you don’t want to dive into those "details," you are ready to devote several hours a day to investigate the equity market, or you’re just not ready to spend more than 4 hours a week in the equity market. Whatever your approach is, you’re still a good candidate for beginning equities trading as a strong desire helps to find the answers to "hows" and "whats."
Find an online broker
This is where you open your account, fund it and just start buying stocks through the broker’s website in just a few minutes. How to find a reliable stockbroker? Do proper research and pay close attention to clients’ feedback on such independent platforms as Trustpilot and others.
What industries are you interested in?
Before you decide to buy equities, you should define the industries that have high chances to lead the market in the future. Here are some of them: healthcare industry, water industry, technology industry, consumer discretionary industry, food industry, fast-moving consumer goods industry, energy utilities industry. This is how you narrow down the area of your choice and focus on the companies with a strong potential for growth.
Conduct some research on stocks
Once you defined the industry, it’s time to find the right equity for investments. Here is what Warren Buffet said, "Buy into a company because you want to own it, not because you want the equity to go up." What do you think? Once you’ve made your choice and found companies, get down to research. You should start with the annual report of a company, its net debt position, and net profit margin. Rely on numbers.
Invest and gain profit
The most reliable way to get profit in the stock market is to buy shares of promising companies at the prices that are comfortable for you to pay and hold on to those shares until the businesses demonstrate strong performance or until you just need money. Start trading stocks and get to the top.
Before you decide to buy stocks, you should define the industries that have high chances to lead the market in the future.
How to find companies for investment? Read our related article here.
Benefits of Investing In Stocks
Nobody can predict the movement of the stock market as it strongly depends on different factors such as the economy's strength, political situation, or even climate change, but still, there are certain benefits of investing in stocks that can’t be denied.
- Easy to master. Take your time. Yes, you can start investing and practicing step by step to develop expertise. Just think of a comfortable sum for investment and try.
- Easy to buy. Once you have an account and devote your time to the analysis, you can buy stocks in a matter of minutes.
- Ahead of inflation. The average annual return is 10%, and it’s better than the average annual inflation rate.
- Easy to sell. Well, if you conduct the analysis and the company meets the requirements for investment, then it’s pretty easy to sell stocks. Another important point is market liquidity which is your best friend in buying and selling.
- Flexible. Your trading depends on your personal preferences. Define them.
You’re at the very beginning of your trading journey, hold back on investing money in stocks. First and foremost, do your homework, be realistic about your vision and expectations, stay focused and you will figure everything out.
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