The Ultimate Beginners Guide to Cracking the Stock Market Wide Open!
Tales of people who have achieved financial independence (FI) are rife in this day and age. Most of them attest to having made a couple of genius moves that lead to their current predicaments. Analytic skills and a hint of dedication were all it took for them to retire early.
In truth, anyone can do this. There’s of course, a certain amount of luck necessary. The trick with luck is that it can be enhanced by playing the game of odds. The more odds are stacked in our favor, the better shot at success we have. It’s all about the numbers.
In today’s analysis, we’ll be taking a dive into the somewhat murky waters of the stock market. The emphasis will particularly be centered upon newbies looking to make a name for themselves in the industry.
It’s quite easy for one to make money by making investments in the stock market. At the same time, it’s also quite easy to lose money. It all depends on one’s comprehension of what they’re doing. The reward lies in the effort. All it takes is for one to make a swing of the bat. In the words of Warren Buffet, there’s no penalty awarded for not taking a shot.
At prime time, news channels like to let us know about which stocks are hot and which ones aren’t that much. Newscasters even get to host economic analysts to talk about the performance indicators and the likeliness of certain companies to register profits of losses. While stock prices are a good indicator of business trading, they don’t really paint the full picture about the health of a company. A number of things need to be taken into consideration in order to judge which company is performing better than the rest.
Definition of Terms
A good understanding of terminologies is perhaps the best place to start. A proper comprehension is essential in getting to communicate and dictate how we want to run our business.
Dividends refer to amounts distributed to shareholders once a company achieves a semblance of stability. However, during its growth period, the profits are usually invested back to the company in order for growth to occur. The shareholders can opt to re-invest their earnings back to the company in order to obtain a larger share of the stock.
In simple terms, market capitalization refers to the current share price multiplied by the outstanding shares. From it, one can ably determine a company’s size by comparing its market cap with others. Price to Earnings Ratio is a ratio obtained by dividing a company’s current share price to the earnings per share. It is a figure that shows just how much money investors are willing to part with per earned dollar.
Picking a Company
As an investor, one needs to look into two broad spectrums, dividend stocks and growth stocks. Growth stocks employ the oft-used terminology of ‘buying low and selling high’.
Growth stocks are dynamic in nature. Thus, they are constantly experiencing fluctuations in the stock price. It takes a good eye to spot a company destined to take the world by storm. A good investment can be a sure way to see a surge in one’s income.
However, due to their dynamic nature, growth stocks are also quite volatile and lead to the loss of large sums of money. On the other hand, dividend stocks are a safer way to make money. Companies that have reached a plateau phase in terms of growth are able to give out dividends to their shareholders. The advantage of such stocks lies in their stability.
When investing in stocks, never stick to a single one since there a greater risk of running into financial troubles that way. A diversified portfolio is a better approach to making investments in the stock market.
Always look to make long-term commitments with investments. Even the most successful of companies often face troubled times. By sticking around, one can get to enjoy greater benefits once those companies make a turnaround. With this information, one can proceed to make investments in the stock market. A good place to start would be by making acquaintance with mutual funds and ETFs (Exchange-Traded Funds).
To get an investment portfolio set up, numerous sites can guide anyone looking to get into the stock market. Noteworthy shouts include E-Trade, Sharebuilder, and Ameritrade. All these sites easily allow anyone transfer funds into their accounts, buy individual stocks, or invest in ETFs or mutual funds.
After picking one of the aforementioned sites that seems to be the most appealing, the next step is to set up automatic withdrawals. These withdrawals can be made from our savings accounts to send funds to our investment account. Doing this can allow us to make savings without really knowing. It’s a wonderful tactic, really!
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