You heard a lot about stocks and wanted to start investing, but did not know what it is and how it works. Here we have prepared some information for you about the shares and the stock market. It will help you determine your actions in order to finally start making money.
Shares are securities that represent the company’s share of capital
By acquiring shares of a certain company, you also acquire a part of its assets. Depending on the total number of shares and the amount you purchased, you can count on a share of the company’s profits, which are paid in the form of dividends.
Stock price depends on supply and demand on the stock market. In turn, the demand for shares of the company depends on how people think about stocks and the company’s prospects. If they assume that the company will grow and succeed in its market, they begin to buy its shares and the price begins to grow.
Before the demand for stocks, they must be brought to the market during an IPO (initial public offering). The initial cost is set by professional investment companies and banks based on expert estimates of the value of the company’s assets. The total value of the company is divided by the number of shares issued, which determines the value of one share.
Then the stock price starts to change, depending on the market. Bad news about a company usually reduces the value of a company’s stock, as people fear about stocks will fall in price due to bad events in the company. Many factors can affect the stock price and almost any information that can affect the company.
Therefore, the value of shares is subject to fluctuations and it is precisely because of that stocks of companies are considered to be more risky investment instruments than currencies or bonds. However, the tacit investment law tells us that more profitable investments are more risky and vice versa.
At the same time, history shows us that stocks often become a profitable investment in the long term and can help you build your prosperous financial future.
Before deciding to invest in a particular company, you should be well aware of what that company is and about stocks it issued. Gather as much information as possible about company, it financial flows, management, products and the markets in which company works. Take an interest in analytical reviews of experts about the selected company and their forecasts about its prospects.
Why are stock prices fluctuating?
As mentioned above, many factors can influence the stock price. Its financial statements and performance mainly determine investor sentiment, which then affects the demand for stocks. News about increasing profitability or profits, as well as releasing new products usually improve a company’s future prospects and rise the demand for its shares, growing their value.
But even those events not directly related to the company or its products can affect the value of its shares. Changes in the world, such as catastrophes, wars, political upheavals, natural disasters and other changes affect people’s moods and confidence in their future.
Uncertainty in the future always stops investors from unnecessary manipulations with money until the situation clears up. The same goes for economic events and changes. Tightening monetary policy usually reduces the cost of securities, the same about stocks.
To be an effective and successful investor, you need to keep track of all the information that may affect the value of the shares in which you invested your money.
Stocks are bought and sold on the stock exchanges, like all other securities. To measure the activity used stock indexes. The NASDAQ Composite Index shows the activity of trading stocks of more than 3 thousand different companies, the Dow index tracks the activity of selling shares of thirty largest US companies, and the S & P 500 monitors trends in the value movement of shares of 500 fairly large companies.
There are also specialized websites that monitor the stock prices of companies on the stock exchanges, but there the information is displayed with a delay of several minutes, so you should not use it to buy or sell stocks in real time. But on such websites you can find out the latest news, see the history of the movement of value and more. All this information will be useful when you decide to invest in shares of a particular company.
When are you going to start investing in company stocks
You can start investing in stocks and trading on the stock exchange only with the help of a licensed broker. His services will cost you money, but you cannot do without him.
It is possible to start investing in stocks of companies through online brokers who will provide you with a lot of useful information.
How to make money in the stock market?
Trading securities in the stock market is always fraught with financial risk. No one will ever be able to give you any guarantees that you will earn money on some securities on the stock exchange. This exercise is entirely at your own risk, so you have to work a lot with the information we mentioned above in order to make decisions that are less risky for your money.
You should buy stocks as cheap as possible and sell as expensive as you can. The difference between these two indicators will be your profit. However, the low price should not be the only argument when choosing stocks for investing. So you can run into stocks of unpromising companies that are unlikely to show any growth. Promising stocks can be quite expensive, but they should have prospects for growth in value. This requires research that you conducted before.
There is another interesting strategy that allows you to regulate your investments. Sending approximately the same amount of money to an investment account all the time, you regulate the number of shares when their value changes. At the same time, it still does not give any guarantees, so be always on the alert.