You presumably know someone in your family or a friend who dwells in the stock market. And perhaps they have a more complicated point of view about the thing. That’s because there is tons of news around it that doesn’t entirely give others an interest. There are those people too that think that it is a place where money gets subjected to losing because it represents a very daunting environment. However, a lot of individuals are still into it. Some of them are still fond of investing in what seems like “nothing.”
The first thing that comes to your mind when talking about investment is the complicated world of the stock market. It is easy to get disconcerted with so many numbers and charts. It complicates the situation when there’s a bombardment of the information you know nothing about. So before you have trouble understanding it, let’s break it down so we can make a sense out of it.
What Is There In The Stock Market World?
The stock market in all countries has its indices. With all of these, it creates a globally networked marketplace. There are vast sums of money that moves in it back and forth. It contains over billions of money traded more than the value of all the goods and services of the whole global economy. The weird part of the stock market is about the winning and losing of money. There is not much physical that is happening in it, and it is significantly similar to any market. Hence, it is anything where goods are being bought and sold.
In the stock market, the goods are called securities. It is a fancy name for financial assets or things that people can make money with. When people are buying stocks, they are buying a small percentage of what they believe is the form of shares in as assets. It stands as a share in the company. The value of shares from a company’s asset is essential. Let’s say you already built a business and you need more money to expand it. That’s where you break down your company and sell parts of it to investors. Note that you have to keep the majority of the shares so you can stay in charge. With that process, the stock market comes in.
How Does Stock Market Works?
The shares from investors allow the company to raise money to expand and invest in the business. But trading of stocks is quite a game of chance. That’s because no individuals can tell whether a company will perform better than the others after a couple of years. If a business has a good reputation, investors will be more than willing to back it up. But a company with a poor reputation will endure the difficulty of selling its shares to investors even if it’s at a meager price.
The thing about the stock market is it instantly changes share prices within seconds. There’s a need for an immediate response so that you won’t have to miss an opportunity. You have to understand the root of the exchange. Theoretically speaking, you become a company owner when you buy a stock. Therefore, you also have the right to the profit and to how much it grows. But then you are not exempted on losing a lot when it falls.
The first things that need consideration when you buy yourself a stock is the setting of the price or amount you are willing to give out for things you don’t know entirely. Perhaps to calculate the risk you are ready to take as well as the growth you are about to achieve. But that’s not certain though. That’s because unlike an ordinary market place, people can touch and take home goods. But on the stock exchange, there are only available virtual goods to have.
The Consequences Of The Stock Market
People should have to understand that even a small rumor can cause a fast fall in a company. That will be regardless of its value to the entire industrial world. But the opposite is also possible. If people consider buying shares that are weak because of the assumption of gaining potentials in the future, the value rises. Usually, young companies benefit from this idea. That even though the younger company’s sales are falling, the generation of cash becomes possible through the placement of investments. In the best case scenario, the expenditure on a falling company becomes a reality and results in a new blooming array of business benefits. However, it can also lead to a speculative bubble that can pop up and get lost in a split second.
Again, the stock market is precisely a game of chance. So before you try and put your faith in a company, might as well study how investing to it can benefit you in the end.
The pull of the stock market to people can sometimes be so strong that they spend hours monitoring it. Some cannot pay attention to their job, primarily when the marketplace is about to close for the day. Others put all their faith of stocks, to the point that they even resign and make trading a full-time thing.
Riding a crowded public train every morning tends to allow you to listen in on other people’s conversations even if that’s never your intention. The oldies talk about their kids and grandkids, for instance. The young students speak of how stressed they are with academic stuff. Nevertheless, here and there, you will also hear millennials showing interest in the stock market.
One person typically asks a friend, “Have you ever considered buying stocks? I know another colleague who got his shares at a multinational company already.” In case the other individual does not have his or her stocks yet, the two may go back and forth on who should purchase stocks first.
While there’s no chance of knowing if these folks did invest in the market or not, little chats like this one show that more and more people are getting attracted to stock trading. It is not an old man’s hobby anymore. Even boys and girls who have not been in the workforce for long start to see how valuable it is to buy stocks. The question that others usually throw, nonetheless, is, “What makes stock investment alluring to individuals of all ages?”
- You Don’t Need To Be A Degree Holder
One of the main things that draw people towards the stock market is the inclusivity that it presents to the world. Anyone who has enough capital can obtain shares from various companies. You can be a CEO or a busboy – your position at the workplace won’t matter when you start purchasing stocks. It is not even important to have a degree in Business or Finance since you can take a crash course on stock trading online.
- You Can Work The Market Anywhere
The stock market is also suitable for millennials or older people because it jives with the on-the-go lifestyle of such people. When you want to go to a tropical island with family or friends for a week, you can do that without worrying about leaving your stocks behind. In case there is a business trip your boss wants you to attend, you can agree to it freely. As long as you have internet on your destination, checking the stock market won’t ever be a problem.
- You Don’t Have To Watch It 24/7
Another thing that makes stock investment attractive to many people is that only a few factors can affect its rise and fall, and none of them can get blamed to the owner of the stocks. Hence, after buying some shares, you may look at the line graphs once or twice every day before you deal with other stuff in your life. If you are quite busy, you can ask for help from a broker to manage the stocks on your behalf. However, the market can never get in the way of your career and personal life.
- You Can Make Money Work For You
Last but not the least, doesn’t it feel amazing to see money getting transferred to your bank account regularly even if you are not doing any physical or mental work? What will be doing all the job for you is the money that you invested in stocks. You can allow your shares to mature, for instance, and gain profits from it as their value continues to increase. Alternatively, you may choose to sell the stocks once their worth goes down or when you are ready to venture into other commodities.
The stock market is an exciting world that anyone with funds can enter. You can earn money without lifting a finger. You don’t need to attend board meetings at a company but still receive profits from its sales.
Now, when will you start investing in stocks?
Whenever a group of friends in their 20s or 30s comes together, it is not impossible for the topic to focus on every person’s investments. Some of them may say, “Oh, we just bought our second house. We are going to move there in a month or two.” Others speak about their new business venture and how they are practically set for life. Of course, you will only hear the friends cheering each other at this point.
Once someone talks about the investment he or she made in the stock market, that’s when you get mixed reactions. Many people may commend you for having the willpower to buy stocks and ride the trading wagon. The skeptical ones, meanwhile, may wonder about who influenced you to make such a “rash decision” and invest your hard-earned savings on something as volatile as the stock market.
Well, if another concerned friend or family member asks you again why you put your money and faith in stocks – and why they should do the same – you can give the following reasons.
- It’s Not Necessary To Invest Everything You Have
The most incredible thing about entering the stock market is that there is no minimum or maximum limit when it comes to the amount you can invest. You perhaps carry a hundred dollars on hand, and you will be able to find a company that will accept that in exchange for a tiny share. You may have an extra couple of thousands in your bank account, and you can also use that to fund your stocks. What this idea entails that you won’t ever need to max out your savings to start trading.
- A Drop In Value Doesn’t Mean A Total Loss
What makes people anxious about investing their money in the stock market is the news about the ups and downs that the value of stocks experience on a regular basis. They worry that when the stocks drop, all their hopes and dreams will fall as well. However, the reality that these folks may not be aware of is that it is sporadic for a company to get completely squashed. Its value may go down sometimes, but it can rise after a while, especially if it isn’t a newbie in the industry.
Considering there’s honestly no chance for redemption, you can always put those stocks on sale and invest elsewhere. Still not a total loss, right?
- Stocks Promise Better Returns Than Bonds And Other Small Investments
According to Standard & Poor’s (S&P) 500, your 100-dollar capital has a more significant opportunity of having a bigger value in comparison with short-term investments and bonds. The profits you will get can rise by approximately 10 percent annually when you have shares, while you may only see around three- or five-percent growth from the others, respectively. This market index has been keeping records of the changes in stocks’ worth from 1926 to 2017, so you can ensure that their research is invalid.
- Your Savings Can Increase Hassle-Free
In case you don’t want your money to sleep in the bank, but you are unsure either if you are ready to start a business or invest in a property, you are free to put some of it in stocks. Once you buy shares from a company of your choice, you merely have to keep track of the movement of the market. In case you don’t have time to understand it, you can hire a broker to help you manage the stocks. This way, your savings can still grow even if you don’t do anything.
Investing in the stock market may not be an easy decision for many, primarily when you have no background knowledge about it. Nevertheless, if you speak with the right people and spend some time to at least know the basics, you will realize that putting your money and faith in stocks is not a vague idea at all.
When someone opens your eyes to the beauty of stock trading, but then you find out that it requires a little amount of work from you to make money out of it, that’s when questions start to fly. First, you may ask, “How can that happen?” Then you wonder, “Is that possible?” And finally, you start thinking about what you can do to ensure that you won’t blow all your money to stock investing.
The real talk here is that there is no way for a single person to tell you how things should be done in this market. Our brains function differently, and there are various commodities and companies to invest on out there. However, in case you want to beat the odds more often than not, you should learn how to think like a successful stock trader.
See the ideas below as a useful guide to make it happen.
- Consider When To Buy Or Sell Stocks
From the get-go, it matters to know when to buy or sell company shares. Although you may have enough money right now to obtain stocks for a particular commodity, you should think about whether it’s best to make a purchase at this point or wait until the end of the year.
Similarly, assuming the value of your shares seems to decrease day by day, you need to have a good sense of when to – or if you have to – sell them. Sometimes stocks take a dip, after all, but that does not entail that they cannot go back up. Other times, it may be more advisable to relinquish your hold on these shares to avoid losing all your dollars.
- Avoid Relying On The Charts Alone
Many newbies in the stock market develop a habit of staring at the charts for hours on a daily basis. In their head, it seems better to monitor what’s going on in this field real-time instead of hearing about any news later.
The problem with getting attached to charts, however, is that you tend to become panicky when you see the line on the graph go down little by little. As mentioned earlier, a dip in the stock value does not mean a complete loss. A smarter technique than this one is to listen to the financial news and read the press releases of the companies you’ve invested in so that you have an idea of what genuinely happens out there.
- Figure Out When To Go Against The Grain
If somebody tells you to buy stocks that are low in value since that’s when they are at the lowest price, you need to sit still and think about a couple of things. For one, why did those shares drop? Furthermore, is there a chance for their value to rise again?
You have to get an answer to these questions because stocks do not take a nosedive for no reason. If it’s because the supply is higher than the demand, its value may increase after some time. In case it occurred because of a major fiasco in the company, then your money may be better off with high-valued stocks.
- Create A Plan B
It goes without saying as well that you should not only have a single strategy when you are in the stock market. Anything can happen overnight, you see, and it’s impossible to predict whether a change in the flow will be beneficial for you or not. To prevent a total loss, for this reason, you need to make a backup plan that you’ll be able to put in motion if ever catastrophe strikes.
Is it difficult to become a successful stock trader without an agent’s help? No. Do wealthy capitalists have a one-track mind when it comes to investing? Not at all.
What we’re aiming to show you above is that it does not take much to profit from stocks. You merely have to be watchful, analyze the hot commodities to invest on, and remain on the lookout for companies that may still be small but can blow up like Google shortly.
Stock trading is not that complex of a subject, to be honest. When you have a few hundred dollars lying around, you can use that to buy shares from any company of your liking. The profits you will get depends on their current value in the market. If you feel like buying more stocks or selling the ones you have, you are free to do that without needing to sign any clause or whatever.
What makes people lose their mind over stock trading, however, is their inability to predict the movement of things in this industry. Some merely rely on what charts indicate, after all. Others try to play safe by riding the tide, but the chance of it being the best decision is still 50:50.
For that reason, remember the things you should not do when stock trading.
- Have A Realistic Objective
You need to ask yourself this question from the get-go: “Why do I want to enter the stock market?” It cannot be because a friend told you it is excellent, so you might as well try it. It cannot also be because you have nothing to use your savings for – you can buy a house or start a business with that.
The reason why you should provide a definite answer here is that that goal can help you stay sane while trading. It will undoubtedly be a rollercoaster ride; you will fall if you don’t have an anchor.
- Avoid Sticking To One Commodity
A smart capitalist does not put his or her faith on a single commodity – keep that in mind. Even though that person has shares in an oil company, for instance, he ensures to dabble into metals, foods, and clothing as well. This way, in case he does not profit much from one commodity, there’s still hope for him to gain something from the others.
That is the kind of mentality that any trader, young or old, should have to prevent losing too much in this industry.
- Use Your Own Money
In case you get in touch with a brokerage firm to help you manage your shares, it is not uncommon to come across agents who will offer you a financial loan. “You can buy more stocks with this money, sir or ma’am,” one may say. Furthermore, they can tell you that “You can avail a higher quantity of shares for half the original price.”
Although the proposal sounds tempting, it is most advisable to avoid taking out a loan for stock purchasing. It can only be good if things are going well in the market since the return of investments at that point is high. Considering it’s at an all-time low, you may face a complete loss because you still have to pay for the loan even when you did not receive any profit.
- Don’t Let Emotions Dictate Your Actions
Lastly, you have to be in control of your feelings and thoughts all the time. Looking at the rise and fall of the value of your stocks can be nerve-wracking, primarily if it seems to be on a steady descent in the past days. You may even want to search for buyers of the shares and open a business instead whenever it happens. However, what will you do if the stocks go up right after selling them?
To avoid regretting anything when trading, therefore, you should not let your emotions dictate your actions.
To Sum Things Up
Investing in stocks is an excellent decision that anyone with savings can make. If a millennial starts trading early, he or she can gain extra money while working full-time. A retired individual, on the other hand, has a continuous source of income aside from the pension that he or she may receive every month.
Nevertheless, to make this venture successful, you should take note of the things that can jeopardize the flow of cash into your bank account. Good luck!
The people who have been dipping their toes in stocks have ways to entice you to enter this world as well. They may start with, “Do you see my three-story house and the Lamborghini in the garage? I bought them using the profits from my investments.” In case that does not move you enough, the capitalists may say, “Don’t you want to leave your toxic job and stay at home or travel without worrying about money? You can only do all of that if you buy shares from different companies now.”
Individuals who speak about stock trading in this manner are not making things up, to be honest. It is true that you can increase your wealth by investing in various commodities. It is also spot-on to claim that the stock market allows money to work for you.
Nevertheless, going on any battle without any idea of what lies ahead of you is not a smart move. To make sure that you are walking in the right direction, here are a few things you deserve to know before investing in stocks.
- Think About The Index Fund
Before purchasing in the market, you should consider having an index fund instead of buying individual shares. The reason is that the former will let you distribute your money on a broad range of commodities. If one company does not do well, therefore, you can rely on others to give you a better return on investment.
- Buy Stocks At A Minimal Rate
Think of this market as a bargain center. You can find the same commodity in different stores, but the prices vary. Because of that, to be able to buy more stocks, you should check out a few sellers, and then invest on one that trades at the lowest or most reasonable rate.
- Learn The Basics Even If You Have An Agent
Hiring the services of a broker should not make you feel like you can trust that person to take care of your investments 100%. He or she may be handling other clients’ stocks too; there may be facts hidden from you as well. To avoid losing your money due to that, you need to spend several hours a day learning the trading basics.
- Don’t Base The Expensiveness Of A Stock According To Its Price
Some people who are new in the industry tend to not give a second glance to stocks that have a rate of 100 dollars or more each. Since many tell them to buy low, after all, it seems better to stick to a five-dollar share. The problem we see here is that the return of investment from the low-valued stocks may merely go to taxes or other expenses that come with trading. Hence, whenever possible, diversify the shares you obtain to increase the chances of gaining profits.
- Sell Your Shares High
Once you already have stocks to dispose of, you should know that you don’t have to get rid of them in a garage-sale fashion. You are welcome to sell your shares at a high price, primarily if you are only doing it because you are tired of trading, not because their value is at an all-time low.
- Listen To The News
The media can give you an idea of how the market moves or what kind of companies to invest on right now. The press releases and news can also help you foresee if the shares you still hold will let you earn a handsome amount in the future or not. You should pay attention to these more than the stock charts.
- Avoid Investing In Companies You’re Unfamiliar With
Lastly, it is wise to put your money on things that you understand. For instance, if you are a techy person, then you know that companies like Google, Facebook, and Adobe are the trendiest at the moment. Their values may not go down even after some years since more and more people will make use of their products. In case you plan on investing, you ought to consider buying shares from these growing giants.
Take your time if you still don’t get how stock trading works. Read a few books; learn from other people. Of course, it will not hurt to remember the things mentioned above as well.