If you happen to be looking for a stock market crash course, this article will give you some insight on what it is and some common investment beliefs.
The stock market is just a place where people come together to buy and sell stocks in different companies. If you pick strong companies that are likely to be around and grow in the future then you can profit in two ways.
One way that stocks make money is by appreciating.Stocks tend to go up over the long term making their investors wealthier and wealthier.
Stocks also make money through dividends. Because you are buying ownership in a company some companies will give you your share of the earnings. Dividend paying stocks usually pay you a small amount of money for every month for every share of stock that the investor or you in this case own.
So, they can be an extremely powerful way to make some extra income. They can definately have a lot of potential over a long time period.
However that doesn’t mean you should start buying random stocks.It is true that in general the stock market goes up, that does not mean that all stocks are worth buying.
That is why most investors recommend doing research on the company and using ratios such as the Price to earnings ratio to determine if a stock is worth the investment or not.
The idea behind this is that if the stock is backed by a very strong company and its stock is undervalue then it can be a good investment opportunity.
One other tip which most financial advisors will give you is to diversify your holdings. Instead of just buying one company and hoping that one company works out for you the idea is to buy a bunch of companies that you believe will succeed over the long term.
That way even if you buy a company and some unexpected news comes out that pushed the company down your loss will be offset by the other companies in your portfolio.
Investing into the stock market can be a wise decision that can help you out over the long term. It can also be very complicated because there are so many viewpoints and strategies out there.
But it should not just be ignored. If you want to build your wealth and achieve financial freedom the stock market is an important thing to master.
Use cost averaging: Buy stocks on a periodic basis to ensure that you are always buying at an average price.
Consider taxes into account: Try to keep the stocks you buy for more than a year to receive taxes at the long term capital gains rate
Invest as much as possible in tax deferred plans: Invest in tax sheltered plans. This way, you need not worry about tax implications.
Do not try to time the share market: There is no legitimate way to predict the stock market trend. Do not try timing it.
Diversify your stock trading methodology: Instead of loading up on just one or two stocks, spread your investment across different stocks.
Diversify your investments: In addition to investing on stocks in share market trading, you can also diversify into other assets such as cash, real estate, or bonds.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges.
As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Past performance of securities/instruments is not indicative of their future performance. This post is only for Educational purpose.