Buying shares can be an intimidating and scary experience for many people. Most cringe at the mere thought of all those numbers, pluses and minuses and so on. People really just want to know the bottom line: Am I making money or losing money? However, buying shares needn’t be a harrowing experience. It just takes a little bit of research, something that is very necessary, to get a concept of how it works and can benefit you. Like any other investment, it’s important to know all the risks ahead of time.
Educate yourself.
It’s your money, so why wouldn’t you want to learn as much as possible about what you’re getting into? Do you know what a “share of stock” is? A stock is considered to be ownership “papers” or certificates that show your investment in a company. The “share” is the actual “paper” or certificate. You can buy several shares of stock in Company A or Company B. The “stock market” is where shares are traded or exchanged and the value of your shares goes up or down based on the company’s stock or how well the company has performed.
Search online for stock market tutorials. There are even videos on YouTube to assist you. Investment companies also usually have training aids on their respective website. The more research you do, the better. The stock market can be a volatile place; you can lose your money very quickly.
Which company should you use?
The first step to buying shares of stock is to find the right company to work with. The Internet has valuable information on investment companies. Deciding which company to go with depends on your wants, needs and what kind of risk you’re willing to take. Also, you will need to decide what type if stock you want to invest in. Thorough research will enable you to choose your shares wisely and reduce your risk.
Your stockbroker is the salesperson who links to the stock exchange. Therefore, you should be comfortable with this person and their company. You should ask questions such as, how many years of experience do they have in the business or how long has their company been in business?
Here are mire questions to ask:
• Are they full-service or discount?
• What are their fees?
• Are there account minimums?
• Are they running any promotions?
• How does their customer service department work?
• Do they offer mutual funds? Foreign stocks?
Getting the answers to these questions and any others you may have will help you decide which brokerage firm to go with.
Understand the risks.
Some people make the mistake of investing in shares without researching them first. Listening to people who are not investment analysts could cost you a fortune. Your stockbroker is most likely not an analyst and would not be able to give you the solid background and forecasting information you would need to make wise investment choices. Some brokerage companies have analysts on staff that you may speak to for a fee.
The basic thing to remember is that you can lose all your money or you can make a lot of money. The stock market can change multiple times throughout the day, so it’s important to watch how your stocks are doing. Usually, stocks with higher risks will provide you a higher return, just as low-risk stocks will provide more modest returns.
What do you want to achieve?
Once you’ve done your research, chosen a firm to work with and studied the risks involved, decide how you want your return on investment to work for you. For instance, are you looking for capital growth or dividends? Dividends are portions of a company’s earnings that are passed on to you, the shareholder, in the form of cash or even more stock in the company. Dividends can be fixed or variable rate and depending on how the company is doing, may not always be paid. Dividends are also usually paid on a quarterly basis.
Capital growth (gain) is more of a lump sum payment. You will probably have to pay taxes on any dividends of capital gains that you receive so be sure to refer to the IRS website for the rules about how that effects your bottom line.
Start off small.
If you’re a novice to shares and stocks then you want to start off with a modest investment amount until you get your bearings. Don’t dump your whole life savings into the market, unless of course, you’re filthy rich and can afford to take a loss. Most people aren’t, so take it slow at first. Once you gave traded a few times you can add to it or buy different shares of stock.
With the right research and self-training, you can be successful at buying shares. Remember that research is the key to any business or personal investment. Doing so will save you headaches and losses later on. Don’t be afraid to ask questions or ask for discounts. Most brokerage firms offer special deals or discounts when you sign up with them. Make a budget prior to getting into a relationship with your stockbroker so that you know exactly what you have to work with and what kind of return you want on your investment.
Don’t stop educating yourself, the stock market is complex; your stockbroker requires two licenses to buy, sell and trade stocks for you. Don’t fool yourself into thinking you can learn it all overnight. Continue learning about different shares and ways of returns on your investment.
Take into account your risks with each share of stock you buy. Be prepared for anything, stock market crash, decline in the business stock you chose and so on. Try to have a safety net set up in case of massive losses and above all stay in contact with your stockbroker; consider speaking with an analyst about your portfolio choices. Taking all these into account will make your share buying experience a painless one.