Are you toying with the idea of investing in stocks?
I’ll assume everybody would like to earn fast cash. Some would even like to try their luck in the often confusing and volatile stock market. Why? According to investing experts, it is one of the most lucrative activities we can indulge in. That’s the reason why “trading stocks” is something I wanted to try even when I was in college. Not only me, actually. Many people are eager to try trading stocks.
Reasons why it’s lucrative:
1. You don’t need lots of moolah to start making more moolah; not like purchasing property wherein you have to pay mortgage monthly.
2. The time you’ll spend to engage in trading is very minimal compared to building a traditional business. Doing this traditional route will require you to wait sometime before you can make some profits. Choosing to trade in stocks will make you profits as fast as you salivate when seeing your favorite food on the table. (Well, sort of!) :-)
3. With stocks, it’s definitely fast cash and it allows you to liquidate more easily. (Yes, converting it to cash is easy as frying eggs — compared to selling properties you’ll need more time to prepare and process documents.)
4. It is simple to learn how to make profits from the stock market. Well, relatively simple. Some people sometimes just don’t get it and that prolongs the learning curve.
First things first.
You need to be crystal clear about the basics of Stocks and Investments before you can dive into the investing world. When you get the basics, you’ll be able to navigate the money world much better. Experts say: “Master the basics, graduate from them then move on to the more complicated ones. They might be harder to understand but they are surely more rewarding and will enable you to accumulate more profits in the long run. You have to become almost an expert about the basics before you trade, or else you will just waste your time and money.
Here’s something that you need to understand right from the outset. What’s scary about investing is that when you make a mistake, you lose hard earned cash. And this is why (I need to emphasize this, I know I’ve been redundant already, but) you need to educate yourself first before playing the game. Teachers and experts of investing suggest for you to spend considerable time learning and mastering them before you soak yourself into the serious money games.
You must have a deep understanding of each and every aspect of investments, stock trading, stock options, company, shares, types of shares and dividends, mutual funds, securities, debentures, options and futures, exchanges, indices, analysis of stocks; how to study about what to buy, SEBI, trading terms (stop loss, short and long, booking profit and loss, call, put) trading options-brokerage houses, etc before shelling out some money.
The difference between Stocks and Shares
The difference between the two is all just in the words nothing more. Presently, Stocks and Shares are being used interchangeably to refer to ownership of a share in a particular company. These are certificates of shares of a company. A stock represents a claim on the company’s assets and earnings. The more stocks of a company you acquire, the more your stake of ownership become greater.
As we go along with this topic you will learn that the stocks are pieces of paper which signify ownership and are referred to as stock certificates. The difference between Stocks and Shares originally came from the context in which they are used.
If you want to be more specific about this, the word Stock is a more general term. It is used to describe the ownership of any company whereas a Share is a less general term. It refers to the ownership of a particular company. If you are a Stockholder of a company, it means that you are one of the many owners of the company. As a part owner of that company, you are duly entitled to share a part of the company’s profits. And in some cases, you are also entitled to voting rights.
The difference between Stocks and Bonds (And what it means to you and your investment strategy)
With regards to Stocks we are simply buying into a “part ownership” of a company and in a lot of cases, you will also get voting rights in that company. On the other hand, with Bonds, you will become a creditor of the company who will be getting payments at the end of the life of that specific bond you’re holding.
So why would you invest with one rather than the other? Actually, it depends on two important things: your investment goals and your basic nature.
Allow me to explain. For instance, are the type of person who always prefers to be sure of the outcome? In more simple terms, are you basically the type who don’t like taking risks? Or are you a natural risk taker? Basically, even if it’s a calculated risk, with bonds you generally have a guaranteed return on your money of about 5 or 7% or even more. That is a fixed percentage and is usually given annually for the life of the bond. With stocks and Shares, on the other hand, there is no guaranty, but it is very likely that the combination of the interest return and capital gain you get from the Stocks will put you way up ahead compared to the income you get from bonds.
So there you got it. The basics. I hope this short article has somehow helped you understand stocks trading and investments.