On your road to financial freedom, you need to have a solid understanding of stocks and how they trade on the stock market. a stock is represented by a stock certificate which is a proof of ownership.you can use a broker who trades (buying and selling) of the stocks on your behalf but at a small commission.
IMPORTANCE OF STOCK OWNERSHIP
You have the right to claim on assets and the earnings.your claim of assets is only relevant only if the company goes bankrupt.
there is Limited liability, that is ,as an owner of stock, you are not personally liable if the company is not able to pay its debts.
owning stock means that , no matter what, the maximum value you can lose is the value of your investment. you can never lose your personal assets.
if your main goal is to make profit, keep in mind that profits are made when you BUY not when you SELL.
BUYING STOCKS
1.Using Brokerage
Full service Brokerage offers expert advice and can manage your account. the only down side of this is that they charge a lot.
Discount brokerage
the people in charge offer little in the way of personal attention but are much cheaper compared to full service brokerage.
2.DRIPs and DIPs
Dividend Reinvestment Plans (DRIP) and Direct Investment Plans (DIP) are plans by which individual companies, for a minimal cost, allow shareholders to purchase stock directly from the company. DRIPs are a great way to invest small amount of money at regular intervals.
HOW TO MAKE PROFIT IN STOCK MARKET
1.Keep reinvesting your Dividends and sign up for a DRIP
The more shares you own, the larger the portion of the profits you get.
Buying companies solely because their market price has fallen will take you nowhere.
Always invest in the long term .if you are looking to cash out right away, there's a good chance you will get burned by the market.
Don't invest if you are trying to get out of debt.
Dedicate time and investigate and conduct a thorough company research before investing in it.
Focus at first on companies that you have some working knowledge of.
2.Consider the overall value of stock.
A $2 stock is not necessarily cheaper than a $30 one. a stock with a higher value than the listed price is one that's probably worth buying.
to determine the value of a company you will have to look at the future performance, cash flow and revenue.
3.create a diverse portfolio
a portfolio with 10 different stocks that are not related is highly recommended. this minimizes the risk of sudden loss. you can focus on technology, consumer goods, real estates, etc.
4. Know when to buy.
buying at the right time is essential to successful investing. Do not buy everything at once.instead, spread out your initial investment over several months to minimize the risk for each buy.
5.add your portfolio as you go.
add more investments with additional funds and move money out of stocks that aren't performing well.
6.know when to sell
sell when the price falls below the moving average for this is the last chance to get rid of stock before it dips too low.
NEVER INVEST MORE THAN YOU CAN AFFORD TO LOSE.
DON'T PUT ALL OF YOUR INVESTMENT INTO THE STOCK MARKET.CONSIDER BONDS, CURRENCIES AND COMMODITIES.
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