How to Purchase Stocks
Simply put, stocks are a good way to develop wealth. They aren’t actually an investment which means that you actually own part of the business that issued the shares. Instead, stocks are the usually how ordinary individuals invest in some of the biggest successful businesses in the world today. If you want to learn about stocks and how to select them, then you will find below some of the basics you should already know about stocks:
A stock is actually a part of a corporation or group of companies. The stocks that represent such groups are called common stocks. These stocks are traded on the open market either by companies or individuals. One can buy shares from the company or purchase 100% common stocks for your own portfolio.
Unlike mutual funds or bonds, stocks only pay dividends when they actually make profits. Most people however are more interested in quantitative results instead. To this end, stocks will fluctuate up and down depending on the fortunes of other corporations. If there is great wealth creation, for example, the value of stocks will rise. Conversely, if the corporation makes losses, then the stocks will crash in price, sometimes even dropping to the point where the investors do not want to buy any more shares.
The most common stock market investment strategy is buying and holding. This simply means that investors will hold onto the stocks for a length of time (usually a year or more). For most people, this is a very conservative form of investing since the gains and losses are more tempered as a result.
As stated before, the main asset of a corporation is its stock ownership. In order to maintain this ownership, many companies will issue dividends. This is done periodically to ensure that the shareholders of the corporation are being paid. The dividend is in addition to the profit made by the corporation and is generally tax free. In most cases, companies offer a minimum dividend that must be paid.
Investing in stocks has its advantages and disadvantages. The advantages include having the potential to gain tremendous profit and fast growth, and the ability to purchase shares at low prices and have them increase in value quickly. The disadvantages include higher risk of losing money and waiting years for the stocks to increase in value. Because of these potential pitfalls, many investors prefer to purchase mutual funds that invest in several different stocks. These funds allow investors to diversify their investments and grow their portfolio at the same time.