Beginner's Guide to Investing in Stocks

 

Why Invest in Stocks? 

Stock or shares refers to the shares in a publicly owned limited company. Purchasing of stocks is wise because people can expand their wealth over a long period of time. 

In the past, stock markets have proved to be more lucrative than other kinds of investments these include bonds or real estate. 

Getting Started:

Before investing in stocks, it's important to have a solid financial foundation

When creating or updating the budget, get rid of high-interest debts such as credit card balances. 

Save for an emergency fund in the range of 3-6 months of your living expenses. 

Deplete all the employer sponsored retirement accounts such as the 401(k). 

Types of Stocks:

There are several major types of stocks to consider:

Blue Chip Stocks: Large-cap shares of companies that are stable, financially sound with good earnings history. 

For instance; Companies such as Apple Inc, Microsoft Corporation, Coca Cola Corporation. 

Growth Stocks: Companies that are likely to exhibit greater growth rates in revenues and profits than their industries’ averages. 

From this list, few of the notable makes and models are Amazon, Tesla, Nvidia. 

Value Stocks: Shares that look undervalued in regard to the firm’s value drivers. Some of them are Berkshire Hathaway, ExxonMobil, Walmart. 

Dividend Stocks: Investing in companies that distribute a percentage of the organizations’ profits to its shareholders at fixed interval. 

Building a Portfolio:

At the beginning, the investor is advised to acquire 15-20 shares in companies from various industries. This helps mitigate risk. 

You can also invest in other stock market baskets sometimes referred to as index funds. 

Investment Strategies:

Some common stock investment strategies include:

Buy-and-Hold: Some of the strategies include not selling the stock for the long-term indicative by market volatility. 

Dollar-Cost Averaging: Purchasing a fixed quantum of a security at a fixed time period irrespective of the market prices. 

Fundamental Analysis: Looking at the numbers in a company’s balance sheet, the executive team, and the sector to assess the firm’s worth. 

Technical Analysis: Forex trading in terms of shifts in price and trading volume as a way of analyzing the market for potential trades. 

How to Start:

Currently, there is a wide range of online brokers that allow easy platforms to purchase stocks such as schwab, fidelity or Vanguard. 

Take your time in beginning with the type of work that you want to do, learn the rules even if you do not like them and gradually build up your portfolio.