Investing is a long-term process and it should only be done with the money you can spare. Otherwise, you may need the amount of money invested at a certain point and be forced to sell it; this way, it will potentially cause losses instead of profits. To date, the process of investing is fairly simple since most of the data is stored directly in electronic form. Before starting any investment activity, one should learn about the merits and demerits of this field.
Nowadays one of the most popular types of investing money is investing in stocks. It should be noted that the popularity of this type of investment is due to a number of special advantages which makes investing money in shares that appealing compared to other options. Obviously, in order for the money you invested in securities to work most profitably and successfully, you need to know certain subtleties and important points of the investment process. Buying and subsequent selling of shares can bring a significant benefit to you as opposed to bonds and other alternatives. In general, the annual return on this type of investment is more than 100%. In addition, it should be mentioned that the shares, in most cases, are ahead of inflation, which allows you not only to save the funds but also to multiply them. The main drawback of investing money in stocks is the volatility of this investment. The value of your securities can fall sharply which affects the state of the market. Just like one of the partial owners of a particular company, you will be the last to benefit from its income, since first the revenues are distributed among suppliers, employees, creditors, etc.
Prior to investing you should:
Depending on the strategy, it can be both large and reliable market leaders and young promising companies. The largest trading assets are stock indexes, dollar, silver, gold and Bitcoin.
A share is a security issued by a joint stock company. Its purchase involves investing in the capital of the organization. How big of a company part the holder of shares owns is determined in proportion to their nominal value and the amount purchased.
What you should know in this category is the types of shares: ordinary stocks give the opportunity to participate in the company's activities (the more shares you have, the more votes are available to their owner) and receive a fixed percentage of the company's profits; owners of preferred stocks do not have the right to vote, the advantage is a fixed amount of income which does not depend on the actual profit of the company.
Most often, investing in shares occurs within the stock exchange. An individual cannot perform such operations on their own so to make a purchase or sale, you need to contact a brokerage company. Sometimes you can buy directly, from an issuing company - such transactions involve an increased level of risk, although they can bring good profit to an investor in case success of the chosen organization.
It is recommended to sign in with a large company that holds a license from the Central Bank, and high ratings from agencies. An experienced financial analyst not only helps with efficient advice but also comprehensively organizes the investment process - from transferring money to paying for purchases before paying income tax.
Investing all funds in one issuer is not worth it so to minimize the potential losses, it is necessary to distribute capital among several companies. You can make a decision both on the basis of a personal forecast and rely on the opinion of the broker.
By investing, the depositor accepts the risks to lose dividend income due to inefficiency of the organization (in the absence of profit), a part of the capital placed in the investment if the market value falls below the purchase price and the invested money in case the enterprise goes out of business (partially or completely). The reliability of investing in shares directly depends on the stability of the issuer. But the investor is also obliged to understand other factors that may affect their value:
Forgetting about investments. The fact that investments are long-term does not mean that they can be abandoned for several years. It is necessary to monitor any slightest changes and evaluate further prospects regularly. Otherwise, you can miss the moment when the investments become unprofitable.
Selling assets during a minimum reduction in value. It is important to remember that prices are constantly changing both ways. It is not necessary to withdraw funds from investments when there is a slight decrease. It is possible that in such a period it is even worth making a purchase of a certain number of securities.
Refusing to sell even if there are obvious failures of the issuer. The opposite situation - the company has serious problems and the market value is falling rapidly. The investor should react quickly and assess the situation; if the situation is temporary, then they do not need to worry. If there are no prospects for the subsequent growth, they you need to close investments in order to prevent even greater losses.
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