Thinking of investing in the stock market? This brief introduction to stock market investing will help you learn the ropes.
What exactly are stocks?
Companies owners often seek shareholders or stockholders when they wish to float (set up) a new company or expand an existing one.
The words ‘stocks’ and ‘shares’ mean the same thing but there is one significant distinction between the two: While stocks refer to ownership in general, shares refer to specific ownership in a company. The higher the number of shares you own, the bigger is your ownership stake in the company.
What kind of stocks should you buy?
You have two options. You can either invest in a large number of shares in the company or you could opt to invest in a fund. When you invest in a fund, you invest in shares of multiple companies. This helps minimise risk as you spread your risk.
Where can you buy stock?
If you are interested in investing in stocks, you will need to find a licensed and certified broker who is legally authorised to buy shares on your behalf. You might want to find a stockbroker who suits your requirement. For example, basic level stockbrokers will undertake to buy/sell on your behalf. Alternatively, you have more expensive stockbrokers who are happy to provide in-depth, detailed financial tips and advice.
Tips to Buy Stocks for Beginning Investors:
- Time, rather than timing is important for stock investments. Allow a period of 3 to 5 years for your shares to grow in value.
- There are several different types of stocks including small and large cap, energy and technology stocks etc. Research each type before you decide to invest.
- The working hours of the London Stock Exchange are from 8 am to 4:30 pm Monday to Friday. You can place any orders to buy and sell within this timeframe. If you place a buy/sell order on penny stocks (or on any other stock for that matter) after working hours, your order will be executed the following morning at 8 am.
In order to protect yourself from unexpected market movements during the night, place what is called a ‘limit buy order’. This means you place an upper limit beyond which you do not buy shares.
Stock investing is one of the best ways of investing your hard-earned money. Ensure that you choose a reliable broker and go with well-known companies in the initial stages.