Investing in stocks is one of the most lucrative methods to create wealth over a long period of time. If you are a beginner and you want to know everything related to buying and selling stock online and how you can make money from them, we will help you.
What is a stock?
Stock means a legal ownership in business. The companies issue their stock as common stocks or preferred stocks. Stocks are also called securities as they are nothing but a financial security.
How to make money from stock?
You can profit from your investment in three ways:
- By collecting cash dividends that are sent to you by the company as a part of profits
- Earning by increase in the intrinsic value per share of the company
- Realize a profit from the change in valuation to the firm’s earnings or other assets
How to invest in stocks?
You can invest by:
- Investing through a traditional IRA account
- Investing through a brokerage account
- Investing through a direct stock purchase plan or dividend reinvestment plan (DRIP)
How to buy stock and sell stock online?
Before you know which stocks to buy today, you must research well. Before buying and selling stocks, garner an accurate information about the company through their website and other journals. Find out information not only about the company, but its competitors also, and also about the industry it is a part of. Check their historical performance and compare with the recent performance. Do look for the speculations for its future performance. Try to look at the larger picture.
When a company goes public by offering their Initial Public Offering (IPO), the Stock Market & Security Exchanges ask these companies to provide financial information of the company so that investors have an exact view of the company’s past performance and future prospects. Study the financial reports and press releases of the company. You can easily get this from company’s website or from the Securities Exchange website.
It is equally important to know why it is time to sell a stock. Even an excellent company can have ups and down. So, keep a watch of your securities in the market. But you cannot buy or sell every time a stock goes up or down. But you should know when it is time to take an exit. A lot of investors stay with a stock too long as they hope it to come back. But it may not, and then it is better to take a small loss than a big one. You must look for these signs of weaknesses in a stock and find when it is time to sell:
- When the profits and earnings are not as high and when their balance sheet is not as strong.
- Look for the dividend cuts. Dividend is a sign that a company is in healthy condition or not.
- Are the news and analysts talking negatively about the company?
- Is the growth of the company too slow? The stock doesn’t seem to be moving, or is growing slower than it has in past, then you might want to sell the stock.