Would you like to be the part owner of a company? If so, then investing in the stock market may be for you. Prior to going out and purchasing several stocks, there are a few facts that you must understand about the market. That is what this article is all about, so read on to learn a few tips.
Do not forget that stocks that you purchase and sell amount to more than mere pieces of paper. While you are a stock owner, you own a part of a company. You are then entitled to both claims and earnings on assets. You can often make your voice heard by voting in elections for the company leadership.
Exercise the voting rights granted to you as a holder of common stock. Dependent on the company’s charter, you might have the right to vote on certain proposals or to elect directors. You can vote at an annual shareholders’ meeting, as well as via the mail through a proxy system.
It is smart to keep a savings account with about six months’ worth of living expenses in it, set aside for emergencies. This way if you are suddenly faced with unemployment, or high medical costs you will be able to continue to pay for your rent/mortgage and other living expenses in the short term while matters are resolved.
Your stocks should be thought of as ownership in a company, not just meaningless pieces of paper which you trade. Have the patience to research companies and look over financial statements in order to better understand the weaknesses and strengths of each company’s stocks. By delving into the nuts and bolts of a company, you get a closer look at where your money is going.
The return you desire should influence the type of stocks you purchase, for example, if you need a high return, look to stocks that are doing better than 10%. The possible return of a stock can be calculated by adding its growth rate and dividend yield. Take for instance, a stock which has 12% earnings and 2% yield may give you around a 14% return.
Always look over your portfolio and investing goals every couple of months. Because there are always fluctuations in the economy, it is important to keep your portfolio current. Companies will merge or go out of business, and some sectors will pull ahead of others. Depending on the time of year, some financial instruments are better investments than others. This is why it is important to keep your portfolio up-to-date with the changing times.
For the novice investor in the stock market, you should be aware that sometimes success is gained in the long term and not immediately. More times than not it takes a considerable amount of time for a stock to increase significantly in value and you need to avoid selling and hold it for the long term. Always be patient when investing in stocks.
Understand what you are competent in, and remain with it. If you are making your own investment decisions, only consider companies that you understand well. If you have first hand knowledge of your landlord’s company, it can be useful information for determining future profits, but an oil rig may be beyond your understanding. Let a professional advise you on stocks from companies that you are unfamiliar with.
Does investing in stocks sound interesting? If the answer is yes, then you need to prepare yourself for entry into the world of stock market investments. Keep in mind the aforementioned information, and you are going to be picking and trading stocks with the pros in the very near future, without bankrupting yourself.