For those who want to make a little more money but don’t have the energy to take up another job, there is an alternative that must be considered – the stock market. Before you begin, however, you must be aware of the many misconceptions that abound about the stock market. By avoiding such fallacies, you will lay the foundation for your stock market success.
You must understand that stock market investing isn’t necessarily just for people with a lot of money to throw around. The stock market is complex, but it isn’t out of the reach of the common man. If you’re interested in stock investing but have been intimidated by all the financial mumbo-jumbo, read on. We’ll cover the basics of how to invest in stocks.
What are Stocks?
Stocks are certificates of ownership in a corporation. When you buy a stock (which also called a share), it means you’ve become a partial owner of the specific corporation that issued it. Stocks are what are called equity investments; and there are two main reasons why you purchase them. First, you may expect the issue to increase in value, or what is called realizing capital gains. Second, you may want to receive a cut of the company’s profits, called dividends. Of course, most people want to receive both capital gains and dividends.
Making Money on the Stock Market
The mechanics behind making money in the stock market is very, very simple, and it is to buy shares when prices are low or depressed, and sell them when prices are high or exalted. This may sound very easy to do, but it is anything but! The problem is that the stock market is inherently unpredictable – with millions of people trading at any given time, it is almost impossible to forecast which way the market is going.
You may be asking, “If it is near-impossible to forecast which way the market is going, how am I going to make money from it?” That’s a pretty good question, and one that can be answered rather simply. If there is one thing you must remember about stock market investing, it is this: Focus on the company.
Again, keep in mind that the stock market is unpredictable, often irrational. If you keep your eyes on how the market moves from day to day, you’ll constantly be shifting from euphoria to depression, from optimism to pessimism. To avoid this, focus on the companies that you want to buy, and don’t pay excessive attention to stock market movements. Try to find the businesses that will earn money in every type of economic situation, and you are sure to make a profit on your stock portfolio.