How to invest in stocks:
The question is do you know how to invest in stock markets? The first thing you should do is learn and is to invest in what you know, but it’s actually not that simple. It’s not enough to simply understand the underlying business…you have to understand what makes a good investment, well, a good investment. There exist different schools of thought here, and investing is part art and part science. You can predict and hypothesize as much as you desire, but no one really knows exactly what’s going to transpire. Some different styles of investing include:
A swing trading position is held longer than a day trading position, but shorter than a buy and hold investment strategy that can be held for months or years. Typically, a tradable asset would be held for days at a time in order to profit from price changes or ‘swings.’ Profits can be attained by either buying an asset or by short selling.
A value investor believes that the market overreacts to both good and bad news. He/she would look for stocks that they believe the market has undervalued; thereby profiting by buying when the price is deflated.
Growth investors invest in companies that show above-average growth. Growth investing focuses on capital appreciation. Growth investing kind of contrasts with value investing.
Great chess players don’t sit at a board and just…play.
Masters of the game have a very concrete plan of how they intend to play. They decision-making that can adapt to whatever their opponents throw at them. Investing is no different: you need a plan to guide your investment decisions!
DECIDING WHAT TO INVEST IN
You know you are ready and willing to invest. Now it’s time to decide in what. Make sure to:
Find the exchange-traded fund which track the performance of the industry and check out their holdings.
Select your stocks based on specific criteria (sector, industry etc.) Use a screener to further sort companies by dividend yield, market cap and other super useful metrics.
Keep up-to-date. Read stock analysis articles. Read financial news releases. Stay critical.
Types of Investments:
Bonds, or fixed-income securities, are debt investments in which an investor loans money to an entity, with interest. The borrower borrows the funds for either a fixed or variable period of time.
Mutual funds are operated by money managers and should match the investor’s objective. They are made up of a bunch of funds collected from many investors and the purpose is to invest in securities like stocks, bonds, etc.
Small-cap investors are the risk takers. These small companies have huge potential for growth. However – because they are often under-recognized, more research is necessary. This requires the investor to have more time available to properly crunch numbers.
Large-cap investors are more conservative – these guys like to play it safe. With their steady dividend payouts, these big-cap blue chip companies are as stable as they come
Penny stocks are super high risk because of their lack of liquidity. Beginners are often lured in to these stocks because of their crazy low share price. This allows investors to hold thousands of shares for a relatively small amount of invested capital. With a scale like that, the gain of just a few cents per share can translate into major returns.