How To Invest In Stocks



How to invest in stocks –it sounds just too daunting doesn’t it?  Investing in shares or stocks, is at times, cloaked in so much jargon that the average person is very reluctant to even consider it as an investment option.



But, it is an option that you should consider researching and learning a little more about.

Once you take and make a bit of an effort to investigate what it entails, you may just find that it may be a viable investment option for you.

At the very least, you need to at least know what it basically entails so that you can confirm that you may like to look into the stock market for beginners or alert you to the fact that it is one aspect of your financial education that you would feel more comfortable not pursuing.


How To Invest In Stocks


Very simplistically the brief overview that follows will get you thinking about how to invest in shares and, if in fact, it is an investment strategy that you would like to include in your investment portfolio.

Who?

  • Firstly, you need to decide on your personal risk profile.
  • You may be the kind of person who is comfortable with investing in shares that potentially have a high risk, but then potentially also may offer you a high return on your invested money.
  • On the other hand, you may find that you are more comfortable investing in stocks that potentially have a lower risk and then similarly may potentially offer you a lower return on your invested money.
  • Of course, you may find that you are more comfortable exploring a middle ground that balances both of the above options.
  • Now, once you have assessed what risk profile you are most comfortable with – then you need to research extensively and try and find a share that correlates with your risk profile.

What you need to look for during your research?

  • You need to try and find a share where the return on the money that you invest will at least be above inflation.
  • You can do your research on google; in financial magazines; you can attend short courses and seminars and you can speak to certified financial advisors.
  • Please remember that when you consider the investment growth target of the share that you are considering to always take management fees and taxes into account when considering if the share will ultimately offer you a return on your investment that is in fact higher than inflation.
  • It is also worth considering diversity in your investment portfolio while you are doing your research.
  • The old saying that you shouldn’t put all your eggs in one basket is worth looking into because you should ideally aim at spreading the risk of all your investments.
  • In this way, while some shares may perform well periodically, while others may not – long term return on your investment is more stable.

Timeline?

  • Check that you have determined your risk profile?
  • Make sure that you have researched the share that you would like to buy thoroughly?
  • Now, where do you go?

Where to go?

  • You will now need to log onto the stock market that you have chosen and you will need to open a brokerage account with a stockbroker who is licensed to buy shares and stocks for you.
  • The stock market is where buyers and sellers trade financial instruments like shares, commodities and currencies.
  • You can also use the internet and do online trading with a discount broker.

How to invest in stocks- who can help you?

Online/Discount Brokers

  • They will take your request to buy a certain share and then buy them for you.
  • They tend to have lower costs because their overheads are generally lower.
  • You use the phone or the internet to conduct your transactions.
  • You will pay per transaction or per share.
  • You can invest almost immediately with a relatively small amount of money.
  • However, online brokers generally don’t offer any investment advice so the onus is on you to be informed and knowledgeable about the investments that you will be making.

Full Service Brokers

  • They will relate to you on a more personal level and then a financial level.
  • They will take a look at your cumulative context – like your age; your appetite for risk; your lifestyle; your income and expenditure (now and for the future) and your assets and debt.
  • They will then structure a long term financial investment plan to suit your financial needs.
  • You will pay higher costs because they will offer a more comprehensive package.

Money Manager

  • They tend to offer the same services as full service brokers.
  • They also generally manage your financial affairs at their full discretion.
  • You will pay a much higher fee because they are generally very skilled and financially well educated.
  • Their fees are structured according to the asset being managed and not per transaction.

How to invest in stock - keep these in mind

  • Stocks and shares are valued by supply and demand.
  • Generally, the more people who want a share (because the company is doing well), the more investors will have to pay for the share.
  • Many external factors influence the market and the price of shares: the economy, politics, the management of a company and consumer confidence and sentiment.

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