The stock market is nearly not as complicated as a lot of people think. It is like an auction where buyers and sellers can negotiate prices and make trades.
This began when countries in the New World started buying and selling among themselves.
Many pioneer merchants wanted to start major businesses and required a certain amount of capital that couldn’t definitely be raised by a sole merchant.
Hence, a group of investors gathered their savings and became business partners and joint owners with their individual shares to form joint-stock companies.
Renowned American investor, Phillip Fisher once said; The stock market is filled with individuals who know the price of everything, but the value of nothing.
Value is what drives everyone and virtually everything in an economy, therefore, understanding how to engineer long term value must be held paramount in the minds of many.
This thinking is furthered in the words of accomplished American businessman and writer, Robert Kiyosaki who had this to say about stock investments and long-term planning:
‘’People don’t like the idea of thinking long term. Many are desperately seeking short term answers because they have money problems to be solved today.”
The stock market can be seen as a place people exchange things that they own, for instance, Mr. A, bought a packet of biscuits and sells to a certain person, Miss B who intends to buy a piece from that packet.
This translates to the fact that Mr. A bought the packet of biscuits when few people saw the need to purchase it, hence, it was cheaper and at the time Miss B was seeking to purchase a piece from it, the value of the packets of biscuits had increased and now, Mr. A can get more money than what he initially spent.
Mr. A initially bought the biscuits because they tasted good (had a high value) but not so many people were purchasing it. Sooner than later, a lot of people like Miss B will appreciate its value and pay higher for the packet of biscuits.
Mr. A stands a high chance of making extra money on every exchange if his thoughts on the value of the packet of biscuits was right.
You could also see the stock market from this angle, there is a small store owner in your community who you are pretty close with. She runs her business well and makes good profit.
She reinvests the cash that she makes to continue growing her business.
During the years, she transforms it into a market and starts making more profit.
Her next step is to make it a chain store and for this, she needs someone to invest. As her friend, she approaches you and you see the potential and choose to contribute with an agreement that you will share profit.
See this from the perspective of a business trying to expand and approaching members of the public for investment. This is called Primary market or the technical term, IPO (initial public offering).
Back to the story, a few years later, you and your buddy have figured out how to make it a chain of 10 stores and at the moment you are in need of money for a pressing family need. You decide to part with your share of the business. Let’s say that is equivalent to 2 stores and two people each give you money and take both stores individually. This is Secondary market.
You can buy individual stocks through a brokerage account or an individual retirement account like an IRA.
A brokerage account is one where an investor deposits money with a licensed brokerage fame who arranges trades on behalf of the customer.
An IRA account is a kind of savings account where the money you deposit and interest earned is not taxable till you retire.
Both accounts can be opened by an online broker, through which you can purchase and sell investments. The broker goes about as the agent between you and the stock exchanges.
Like every other thing in life. Stocks have their pros and cons – with pros weighing heavily on the cons which of course it’s a good thing.
Over time it has been seen that an expanded stock portfolio will surely increase in value over time although there might be a chance that the stocks also experience sudden dips.
However, to enjoy broad market exposure and low operating expenses, you can invest in a type of mutual fund called an index fund or an exchange-traded fund.
It is smart to invest in stocks with the cash you do not require to use immediately – that is cash you may need within the time frame of five years.
Benefits Of Investing In Stocks
- Great opportunities abound in exploring a Growing Economy
You stand to make considerable gains in the stock market because as the economy develops, so does corporate profit. When companies generate a sizable income, you earn big on the grounds that financial development leads to employment, which makes salary, which in turn makes deals available to people. The fatter the check, the higher the consumer demand, which drives more incomes into organizations’ sales registers.
- Easy Purchase
One great thing the stock market does is make it easy to purchase shares of companies and invest. You can buy them through a broker, financial planner or even online. Once you’ve set up an account, you can purchase stocks in a matter of minutes without a rigorous process involved.
- Earn More by Gaining Both Ways
Most investors buy low and sell high. They invest in fast-developing organizations that appreciate in value. This is one strategy benefits day traders and buy
Day traders buy and sell stocks within the same trading day while Buy-and-hold investors, just like the name implies are the ones who buy stocks or other types of securities and hold them for a long period of time despite changes in the market. Both parties are incredibly skilled at picking stocks and this helps them outperform the market and cash out heavily.
- Selling Is Easy
The stock market gives you the freedom to sell your stock whenever. Market analysts utilize the expression “liquid” to mean you can transform your shares into money rapidly and with low exchange costs. That’s significant if out of nowhere you need your cash in a rush. Since costs are unpredictable, you risk being compelled to take a loss.
- Access To The Right Facts
When investing in the stock market, what you can bank on is clarity of information. The world is keen on the stock market so it is being watched closely. Before a company can publicly sell its stocks, it has to release a financial statement which shows how it is being run.
Also, financial reporters are constantly reporting on stocks around-the-clock.
Hence, getting proper information about stocks is a lot easier and this helps decision making greatly.
Here’s how you can succeed in stocks:
1: Stay Away From Shortcuts
In any case, a few investors are not ready to do the important research and settle for an alternate route. Everybody wants an edge when investing. The market can appear (and be) overpowering, and any preferred position appears to be a decent opportunity to score a success.
Be that as it may, an excessive number of investors think shortcuts are the best approach to progress. Frequently these easy routes come as a tip from a companion or partner. The intensity of an individual proposal is convincing, regardless of whether the recommendation is originating from somebody who may think less about contributing than you do.
In past years, such word of mouth information was shared at the workplace or in the neighborhood. Presently, it can be found on social media sites, email, and a heap of other information technologies. What hasn’t changed is the reason you ought to overlook the greater part of these accommodating tips. A rule of thumb is: Never buy a ”great stock”.
Yeah, every good investor wants great stocks and so do you but most of the ”great stocks” are usually not quite as certain as you may think.
2: Say ‘NO’ Sometimes
At the point when you are investing hard-earned money, it is good to take your time and get settled with your choices. If a stock doesn’t “feel” right, you can avoid investing by saying ‘no’. There are numerous chances, so you don’t need to seize the first, second, or twentieth stock you examine.
Maybe you pass on a companion’s “great stock,” and it ends up being a grand slam, salute them for their favorable luck, yet don’t re-think yourself. For each grand slam, there are 20 strikeouts.
There are two parts to making a good investment decision (in case you intend to hold the stock in your portfolio for some time). The initial segment is to recognize a company with sound business and great possibilities for future development.
The subsequent part is to recognize a price that tallies with where the organization is and where it is going. You need to pay for both. Try to not pay a lot for either. In spite of the fact that there are various recipes to assist you with deciding present and future value, making sense of the correct cost to pay for stock goes a long way as regarding your investments.
However, knowing how to put resources into stocks can be extremely beneficial and we are always eager and ready to help.