Are you planning to start your journey on investing in the stock market? We have explained all the pros and cons everyone should know before venturing into the stock market.
Oftentimes, people encounter losses from their investment or shares that they have with some of the investment companies that allow them to buy some of their company shares.
Because some individuals don’t have much knowledge of how the stock market operates, they sometimes lose more than 50% of their investments.
As an investor in the stock market, you should have in mind that you’re entering into a risky business. The reason is that this market is most times not predictable at all.
On the other hand, the stock market can serve as a passive income source that will automatically boost your net worth overnight.
Most of the richest people in the world today have accumulated shares in the stock market which pumps their income rate once their shares rise.
We have a lot for you in this content so that you will be more exposed to how things work in these online investment platforms as well as how you can get started.
What is the stock market?
The stock market is also known as the share market or investment market is an online open market that allows buyers and sellers of stock (or shares) to form a union where owners of businesses and companies can allow people to have some shares in their company via investment.
Individuals can invest in the stock market through electronic funding platforms or direct stock brokerages.
Regardless of your country, one can invest or buy shares from companies that are located outside his own country. For instance, one may decide to own a share with Facebook, Netflix, etc.
What you need to know about the stock market & why you should invest today
Buying shares in a company means that you’re purchasing some of the company assets. This means that the company will now regard you as someone who partners with the company’s business.
As a shareholder in the company, you have the legal right to get involved in the company’s business plan as well as other things that go on in the company, such as electing staff, etc.
As an investor, your target should be to earn revenue in the meantime when the company grows and generates more revenue from its services.
Most of these companies pay up to 10% of their shareholder’s investment to the company; this implies that as the year goes by and the company generates profit, your share in the company will as well grow.
The fact that different company offers diverse services and their annual revenue also differs, we recommend that one should invest in companies to not to get disappointed in his annual profit as a shareholder in the company.
How to start investing in stocks – A beginners guide
When you invest your money in the stock market, it simply means that you’re storing money for future use.
This is the money that one sets aside because there is no immediate project that accumulates the freedom of that money at that moment.
Investing can be seen as the money that an organization pays their retired workers which are popularly known as gratuity. This investment can help you to achieve your targets even when you’re very old to the point that you cannot work anymore.
An investor can trust his investments because it is a surety that he will eventually have to settle his expenses even when he is no longer working.
Investing in the stock market is simply putting your money in a save which is capable of growing that money in the meantime.
If you have some spare dollars with you and you’re planning to venture into this market, you have to find yourself in the right place. All you need to do is to go through this article carefully.
Some facts you need to know about the stock market
- Investing in the stock market is usually a risk because there are a lot of chances of losing the money you invested.
- Always have in mind that you’re investing in the future. Don’t be in a haste to cash out your money.
- While investing, look for companies that are trustworthy and also recommended by investors.
What it means when you own stocks
When you own stock in an organization or company, it means that you have legal rights over some of the properties in that organization. These legal rights include but are not limited to voting, supporting decision making, monitoring inflow revenue, etc.
When you own a share in a company, it doesn’t make you either a staff in that company or to be equivalent to the owner or even the managers of the company.
Your share in a company simply means that your money is involved in the company’s expenses, not that you own some of the company’s assets. You’re just an investor and as the company grows, your profit grows as well.
In the same manner, if the company fluctuates in its revenue, your share in that company will also be affected. The reason is when the company’s revenue increases, your share will rise as well.
But if the company encounters challenges and encountered losses, your share will also depreciate in its value.
What exactly is the stock market?
The stock market can be defined as a public place where shares of companies are being traded. Stock market trading involves brokers who watch, monitor, and controls the activities of stocks in the market.
Stock investors can purchase stocks that are enlisted in the general market. This now allows stock traders to buy and also sell in the stock market.
The stock market as every other market allows investors to buy shares from companies and oftentimes, this investment is usually a long-term investment.
Beginners guide on how the stock market works
People who are interested in the stock market should know that this market is composed of exchanges. You invest and expect a good major of profit in the future.
Stocks from different companies are listed in the stock market and this gives investors a drop-down menu to invest in assorted companies that they wanted to.
Big companies usually sell shares to individuals to raise money for their business. These companies now use this money to develop certain departments in the company as well as expanding the company.
Meanwhile; as these companies are doing this, stock traders are out in the market looking for growing companies that they can invest their spare money into.
The process that companies used to release their shares in the stock market is popularly called Initial Public Offering (IPO).
Immediately their shares are available in the stock market, they can then be bought and sold among traders, brokers, and investors.
In as much as those shares are available in the stock market, individuals can also buy from other investors. They must not buy directly from the company itself.
On the other hand, investors who wish to sell their shares can sell to other investors who wish to buy. Meanwhile, investors should not be bothered about how they can sell their stocks because a lot of people are out there to buy shares.
Who controls the stock market?
In the world today most especially in the United States, the stock market is controlled by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
They ensure the market rate and how stocks are being distributed to investors who are willing to purchase shares from a company.
Is the stock market safe to invest in?
The stock market cannot guarantee profit to investors and brokers because there is a high possibility of risking your money most especially in the short-term investment.
Even though up to 70-80% of brokers said that long-term investment in the stock market usually guarantees a profit. In as much as this is possible, some investors encounter loss at the end of those long-term investments.
As an investor, just know that everything is possible; you can make a profit in stock and also encounter losses in the stock.
Do you lose all your money if the stock market crashes?
As an investor, you can lose your money when depreciates in its value; in other words, crashes. But if you exercise patience and allow your share to arise, probably you have to give it some years; you can recover from the crash.
If you purchased stock at a certain price range, you may be tempted to sell it off when the price depreciates.
No! It’s not advisable to own different shares of stock. The reason is that some brokers used to attach fees to each share that an individual buys.
You can buy one share of stock if your budget matches the price of that share. For example, you can buy $1,000 worth of shares from just one stock.
How much money do I need to invest to make $1000 a month?
This calculation cannot be done straightforward. Different companies pay a certain percentage of profit to their shareholders.
Some brokers reported that one needs to have a minimum of $100,000 investment in the stock market before he can start planning of generating $1,000 from stock every month.
Depending on the company’s growth and revenue, that amount can even give you more than a thousand dollars in a month.
If you have the money and you wanted to invest, it’s quite advisable to buy up to 100 shares of a stock if and only if their charges are low.
How can I learn stock market?
There are a lot of ways that one can use to learn the stock market. They include but are not limited to:
- Studying the market to know the rate of inflows and outflows of different companies.
- By learning from a mentor; here an expert in stock market trading guides and teaches you what to do at every moment.
- There are a lot of well-detailed books that you can use to learn the stock market and become an expert broker.
- Watching videos on stock-related trends can as well be of great help.
- Taking some courses online about stock markets.
Which is the best stock market in the world?
Some of the top and largest stock exchange markets in the world today are:
- Hong Kong Stock Exchange (HKEX), Hong Kong.
- Tokyo Stock Exchange (TSE), Japan.
- Shenzhen Stock Exchange (SZSE), China.
- London Stock Exchange (LSE), United Kingdom.
- National Stock Exchange (NSE)/Bombay Stock Exchange (BSE), India.
If you want to start investing in the stock market, the above-detailed guide contains all that you need to get started and be successful as an investor or shareholder.
We mapped out time to take you through the necessary things you need to know before venturing into the stock exchange, including long term and short term.
What you need to know before choosing investment companies and how you can start investing were all covered in this guide.