Buying stocks is the basis of investing for many people. It is therefore a form of investing that you can use the most because it is very extensive. Stocks are also the oldest and most popular way of investing. Buying stock is a way of influencing the way a company does its job. The more shares you have, the greater your influence becomes. However, this is not the reason for many people to invest. Rather, it is a way of generating extra return in a fairly reliable and risk-free way, as long as you spread the stocks you buy as much as possible over different regions, sectors and indices. In addition to purchasing shares yourself, such as from banks or through certain trading houses, you can also choose to speculate on share prices. This is possible with many brokers online.
What are stocks?
When you start investing, in most cases you will end up with shares. However, it is not very clear to many people what stocks actually are. That is why it is good to get a brief explanation about this.
Ultimately, a share is nothing more than proof that you have taken ownership of a part of the company that issued the share. A company issues these shares to raise money. With that money they can, for example, make investments to grow the company. When the company then grows, your share will be worth more. In fact, shares are nothing more than a piece of value that is part of the total value of a company. All issued shares of a company times the price is the value of the company listed on the stock exchange.
How can you buy shares?
It is easy to understand that you also want to invest. Many investors have made a lot of profit in recent decades. The question you may have is how you can buy shares. After all, this is not easy either. For example, you cannot go to the store to buy a share there. You also cannot go directly to the company you want to invest in.
One option is to go to your bank and ask what options they offer. They often have investment counselors who can buy the shares for you. The disadvantage is that they charge a commission for this, often 1% of your portfolio and some other costs. If you really want to invest yourself, just open an account with an online broker. Brokers are intermediaries that facilitate trading in shares or speculating on them for you. You can purchase shares with an investment account. Then you can also sell them again at any convenient time of the day.
The value of shares
Each share has its own value. This is an important fact to know. This is important for determining the strategy you are going to follow. After all, if you want to make money, you have to find stocks that you can use. These could be stocks that are low and rising quickly. This is a short term idea. You can also go for more stable stocks that are already a bit higher and that are steadily rising. This is more of a long-term strategy. People have become very rich with both strategies, so one is not necessarily better than the other. Investing is also mainly about you as a person. What suits you. If you are someone who is troubled by price fluctuations, short term trading may be better for you than long term.
How does investing work?
Now that you know that there is such a thing as a short term strategy and a long term strategy, it is good to know how to invest yourself. What is important is that in both cases it comes down to the same thing. You buy a share for a certain value and you want to sell that same share at a later time for a higher value. In the short term, this means that action must be taken quickly; you want to grab your winnings faster. Some shares change hands several times a day. Sometimes you only own a share for a few minutes.
Because the short-term strategy means that you have to invest a lot of time in investing in shares, this is often more for professional investors. In addition, you need to be on top of the news or somehow get some inside info so you can anticipate price fluctuations. More common for individuals is to choose a long term strategy. You then speculate that the stock will increase in value over a longer period of time. This can be several months, but more common is to hold the shares for several years, or even several decades. On that basis you can then earn some money at later times in your life. This strategy also involves a lot of knowledge, because of course you need to know how markets move, what the underlying values of companies are and understand the cycles of the world economy.
Long-term strategy Equities: have knowledge!
For a long-term strategy it is important that you acquire a lot of knowledge. Especially when it comes to the companies in which you want to invest your money. You need to know what the company is planning and how that vision for the future should come about. On the basis of this you can really determine whether the share will increase in value. This can be quite difficult to determine, especially when you are entering the market as a beginner. Hence, it can be helpful to seek help from investing experts. They often have all the knowledge in-house.