Investing your money in stocks is one way to achieve accelerated growth of your wealth. Many people discourage stock investing because it comes with a high degree of risk of losing money. However, as I see it, not investing at all is a bigger risk! What they don’t tell you is, where there is a high degree of risk, there are high returns too. There are ways you can minimize the risk factor, or rather take calculated risks. It all depends on the intellectual framework that you follow while making choices. In this article, I present the stock market investing basics for beginners. To fully comprehend them, you need to know how does the stock market work and how is it regulated.
Stock Market Investment Basics In a Nutshell
To a novice, stock investing can be pretty much of a bewildering experience. The stock terms or jargon do not make things any easier. Let me explain the stock market investing basics in as simple terms as possible. It is sort of a short tutorial on stock market investing for dummies.
Introduction to Concept of Stocks
The most ‘basic’ of the stock market investing basics is the concept of a ‘stock’ or ‘share’. When you buy a stock, you buy a quantum or share of ownership in the company. That is the basic idea. To raise capital, a company gets listed on the stock market after it sells ownership in the form of millions of small shares. When you buy a stock, you become a shareholder of the company, who possesses a quantum of ownership in that company. The selling of shares of a company in the primary market is through ‘Initial Public Offering (IPO)’. Once the shares and stocks are bought, they can be sold in the secondary market which is the stock exchange.
How to Make Profits Through Stock Investing
All that is okay, but how does one make profits? It is simply by buying a share at a lower price, holding it till its price rises in the secondary market, and then selling it. ‘Buy Cheap and Sell as Dearly as Possible’ – that is how profit is made in the stock market. So, the basic idea of stock investing is just this. You pick out stocks with potential to grow, you buy them and sell them when you think their price has peaked enough. That is all that is there to it.
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