Investing in stock can be a good way to build wealth over a long time. Having thorough knowledge in stock investing can make a big difference in the growth of your portfolio.
We will cover some basics about investing in stocks. The goal is to give you general idea of what stocks and how they work.
- What are Stocks
- How can you make money with stocks
- Picking the right Stock
- How to Buy or Sell Stocks
- When to Buy or Sell Stocks
- Taxes on Profit made on Stocks
What are Stocks?
Simple put stocks are part of the ownership of a company. When you purchase a stock of a company you own part ownership of that company. For example, if a company has 10000 shares and if you buy 100 shares then you own 1% of that company. This is a great way to invest your money in the company you trust or believe.
How can you make money with stocks.
There are 2 basic ways of making money with stocks.
- When the stock you own goes higher in value and if you sell it, which is called “Capital Gain”.
- When a company pays out a part of a profit, which is called ‘Dividend”.
Besides buying and selling, there is a method called options trading. Many traders use options to make money. Options are riskier than owning a stock especially if you are a beginner.
Picking up the right stock.
There is not a perfect or specific strategy for picking up the stock. But you should consider the company’s fundamentals to make your decisions. You want to buy a stock of a company that you believe will grow in the future and generate more profits.
You should check following fundamentals before picking a company.
- What kind of products or services they sell.
- Market capitalization
- Past performance
- Revenue.
- Profits
- Future growth potentials.
- Dividends
There many more factors you can consider before picking up a company.
There are many stockbrokers who can do picking who can recommend you a stock or a portfolio for a fee.
You can also look into ETFs to invest in a broader market instead of picking up individual company stock. ETFs are a collection of different company stocks under one common stock. For example, “PDR S&P 500 Trust ETF (SPY )” comprised of 500 large and mid-cap U.S. Company stocks. So owning 1 SPY stock meaning you have invested in all 500 companies that are within SPY ETF.
