At some point of time in your life, you will realize the only way you can let your wealth grow beyond a certain limit is through investment. The returns on your investments are directly proportional to the degree of risk involved in the venture. You have a whole spectrum of investments to choose from, differing in the amount of risk involved. On one end of the line are the safest investments like low yield treasury bonds, while on the other end are stocks.
What are Stocks
A stock is a quantum of ownership in a company, which you may buy and sell on the stock market. When you buy a stock, you become a partial owner of equity in the company that issued the stock. To be able to buy a stock of a company, it has to be listed on a stock exchange.
The prices of stocks keep changing according to the performance and turnover of the company in any quarter. You can either buy a stock, when it is issued by a company or from the stock market. There are many types of stocks including common stocks and preferred stocks, which vary in the kind of rights that are offered to the stock holders. Just check out the stocks to buy now, whose performance is listed in financial newspapers and dedicated websites of stock exchanges. You need to get introduced to the basics of stock market investing.
How are Stocks Issued
When companies reach a point of expansion where they need more capital for growth, they 'Go Public'. That is, the private owners, sell a part of their equity in the company to raise cash. This process of issuing stocks for the first time in a stock market and listing of a company on a stock exchange is called the Initial Public Offering (IPO).
Stocks are sold by the company to investors at a primary face value which is preset. After that, the company does not profit from the sale of stocks. The secondary market for sale of stocks is the stock exchange where they are traded, as their prices fluctuate according to market conditions and company performance.
Introduction to Stock Trading
How do people make profit selling stocks? The idea is quite simple. They make profits by buying stocks cheap and selling them for a higher price. So, the trick is to choose the best stocks to invest in, that haven't yet attained their true value. You buy them at a lower price and then sell them when they attain a high value. There is always the risk that the price of stocks may fall and you may face a loss. That is all a part of the game.
Timing is very important when it comes to stock investing, as you need to know what to buy, when to buy and when to sell. You need to know the best stocks to buy right now after thorough research of company performances. It takes time to learn market dynamics and the intricacies of stock investing. You need to learn how to play the stock market. You can either invest directly, on your own, or through brokers.
If you are buying stocks for the first time, one of the best books to refer, is 'The Intelligent Investor' by Benjamin Graham. It is a must read book for every new stock investor. It professes the theory of value investing which is a more sound technique of investing in stocks, compared to speculation based investing. So, please refer to the book before you even think about investing in stocks. It is the bible of value investing that will provide you with a logical structure for analysis of company balance sheets and choosing the right stocks!
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