Investing in the stock market can be a great way to get your money to work, particularly in the current economic situation, where long-term savings accounts and investment funds do not offer significant interest. However, the stock market is not without risk and, in some cases, losses will be inevitable. However, choosing successful stocks and investing in the right startup companies can prove to be very profitable.
Steps
Part 1 of 3: Getting Started
Step 1. Research current trends
There are many reliable sources that give news on the market trends. You could subscribe to industry magazines or follow blogs written by the most successful analysts.
Step 2. Choose a trading website
Make sure you know the rates or percentages that will be paid by you before deciding which site to use.
- Make sure you are using a reputable service. Search the internet for business reviews.
- Choose a service that offers the features you find most useful, such as a mobile app, resources and educational material for investors, and accessible customer service.
Step 3. Create an account on one or more trading websites
You will rarely need to use more than one, but creating more than one account will allow you to calmly choose which site you prefer.
Step 4. Practice trading stocks before doing it for real money
Some websites offer virtual trading platforms, where you can experiment for some time to gauge your prowess without risking real money. Of course, you won't be able to make money this way, but you won't be able to lose money either!
Step 5. Choose good deeds
You have a lot of choices, but ultimately you should buy stocks in companies that dominate their market share, that offer something that people consistently want, that have a good business model and a successful track record.
- Consider researching a company's public balance sheets to see how profitable its shares are. A company that earns more offers more profitable stocks.
- Look at a company's worst quarterly balance sheet and decide whether the risk of that balance being repeated is worth the potential profit.
- Study the executives, operating costs and debt of the company. Make sure you are convinced that they are headed in the right direction.
- Compare the stock history of a specific company with the performance of rival companies. If all stocks in the tech sector have fallen in a period, evaluating them in relation to the individual sector and not the entire market can help you understand which company is the leader.
Step 6. Buy your first share
When you're ready, go for it. Buy shares. You could start with a small amount of trustworthy actions. Well-known companies with a solid equity record, which have a good reputation, are usually the ones offering the most stable and best stocks to start with.
Step 7. Check the market every day
Remember that the fundamental rule of the stock market is to buy low and sell high. If the value of your shares has risen significantly, you should consider selling them and reinvesting the profits into other shares.
Part 2 of 3: Understanding the Basics of Trading
Step 1. Buy low
This means that when stocks are relatively low in price, you should buy them. Of course, no one knows for sure when prices will go up or down - that's the risk.
Step 2. Sell high
The ideal is to sell the shares at the maximum price. If you sell stocks for more money than you spend buying them, you will make a profit. The greater the price increase, the greater the profit.
Step 3. Try not to sell out of panic
When a stock you have falls below the original purchase price, your instinct may be to get rid of it. Even if there is a chance that a stock will continue to plummet and never rise again, you should consider the possibility that it will rise again. Selling at a loss is not always the best idea, because you will not be able to recover what you have already lost.
Step 4. Decide whether to follow the fundamental or technical market analysis
These are the two basic models for analyzing the stock market and anticipating price fluctuations. The model you use will determine decisions about which stocks to buy, when to buy and sell.
- Fundamental analysis makes decisions about a company based on its business, character, reputation, and leadership.
- Technical analysis looks at statistical graphs and historical data, making decisions based only on this information. A retail company, for example, often sees sales increase during the holiday season, so its shares historically rise in value during that time.
Step 5. Find companies that pay dividends
Dividends allow you to earn money with stocks that do not go up in price. They are the shares of the company's profits paid directly to the owners of shares.
Part 3 of 3: Developing Your Equity Portfolio
Step 1. Diversify your investments
Once you have bought stocks, and when you understand how buy and sell operations work, you should diversify your stock portfolio. This means that you should invest your money in stocks of different companies.
Startup companies can be a good choice when you've established a share base of more established companies. If a startup were bought by a larger company, you could potentially make a lot of money very quickly. However, consider that 90% of companies do not exceed 5 years of activity and this makes your investment risky
Step 2. Reinvest your money
When you sell a stock (hopefully for more than you bought it), you should reinvest the profits into other stocks. If you can make money every day or every week, you are well on your way to success in the stock market.
Consider depositing some of your profits into a bank or pension fund
Step 3. Invest in an IPO
An initial public offering (IPO) is an offer to the public of the securities of a company that intends to go public for the first time. This can be an excellent opportunity to buy stock in a company that you believe will be successful, because the IPO price is often (but not always) the minimum share price of a company.
Step 4. Take risks
The only way to make big money in the stock market is to take risks and get lucky. Seeking safe profits with reliable stocks will usually not allow you to make a lot of money. These stocks have a tendency to be stable, which means you won't lose money, but you probably won't earn any either.
Step 5. Talk to an accountant
If you start earning a lot from the stock market, you should talk to an accountant about taxing your profits. Your profits may require you to pay a higher rate or you may have to report your earnings according to the laws in your state.
Step 6. Know when to withdraw
Stock trading is akin to legalized gambling. Some people develop unhealthy obsessions and lose a lot of money. If you feel like you're losing control and not being able to make rational choices about what investments to make, try asking for help before you lose everything. Do you know someone who is intelligent, rational, objective and non-emotional? That is the person you should ask for help if you lose control.
