Quick start guides for stock exchange concepts.

Stock investing is a potential way to grow your wealth over time. It involves buying shares, expecting the chosen company to grow and perform well in the long term, and ultimately, your investment will grow. In the first step of your investing, set clear investment goals, investment amount, and risk levels. After this, choose the right broker that aligns with your trading strategy and risk levels, invest your account, and buy stocks.

Why do people invest?

Individuals with savings who want to grow their wealth over time consider investing. You can invest cash in an account and earn interest on it, which will provide passive income. Or if you keep the cash savings, over time, due to inflation, the value will start to decrease.

Basics of investing

This article will help you understand the basic concepts of investing in the stock market, whether you have a small amount or a considerable amount to save.

What Are Stocks?

Stocks are a fundamental way for everyone to become an equal partner in a company by investing in that company. Companies sold these stock shares in the stock market to fund their growth over time. It is called an Initial public offering (IPO). After this initial public offering (IPO), stakeholders can sell the shares on the stock market. The share price can rise, fall, and is driven by expectations of the company's earnings and profits, as well as market conditions.

Stock buying

The following are different ways in which you can buy stocks from the listed companies in the stock market.

Direct stock planning with companies

·       Buy/ sell stock directly with companies

·       Some companies offer shares to their employees or shareholders

Reinvest your dividends

·       Reinvest your dividends collected to buy more shares of the same stock you already own

Discount Or Full-Service Broker

·       The brokers will buy/sell shares, and they will take their commission

Stock Funds

·       Investment companies offer stock funds, and they can be purchased by you or your investor

Potential Benefits of Investing in Stocks

The potential benefits of stock market investments are as follows:

·       Potential capital gains by taking the stock which have gradual growth

·       The company pays dividend income in return for investment

·       Low tax on long-run investment gains

Potential Risks of Stocks

The potential benefits of stock market investments are as follows:

·       A fall in the value of the company share price

·       In case of liquidity, you will be the last ones to be paid, so you will not get back your money

·       Share price and dividend may vary (i.e., rise and fall in value)

Types of stocks

It is for investors to know and understand the various types of available stocks. They can decide on suitable investments based on the unique characteristics of different stocks. The following are types of stocks to help reduce the confusion an investor may face with stocks.

Common stocks 

It is the most common stock, indicating ownership in a corporation. Stakeholders can get voting rights and dividends. However, everyday stock investors are among the last to receive the company's assets in the event of liquidation. These stocks are volatile, affected by market conditions, company performance, and investor mindset. Examples of these stocks are Microsoft, Amazon, and Apple.

Preferred Stocks

In these stocks, shareholders get their dividends, but they don't have voting rights. If the company goes bankrupt, then preferred stockholders have priority to get their assets. Examples of these stocks include Bank of America and AT&T.

Blue-Chip Stocks

Blue-chip stocks are sometimes called a conservative strategy. These stocks are well-established for their financial security and respect. These companies are market leader in their respective fields with steady performance and dependability. This strategy is suitable for investors seeking long-term development and stability. Examples of these stocks are Microsoft, Johnson & Johnson, and Apple.

Growth Stocks

In this strategy, earnings grow more quickly than the market average. They hardly pay dividends, and investors' main aim in buying them is for capital appreciation purposes. Examples of growth stocks include a start-up technology company.

Value Stocks

Companies' shares that are undervalued currently in the stock market are termed as value stocks. Value stocks may not always reflect actual value, despite having strong fundamentals, such as a continuous track record of dividends and earnings. Investors sought these stocks on the belief that they would reflect intrinsic value by an eventual rise in price. It is a conservative investment approach that provides a gradual return. Energy companies and financial services companies are examples of value stocks.

Income Stocks

These stocks have consistent dividend payouts. A dividend is the portion of a company's earnings that investors receive. In this way, shareholders can generate passive income after buying it. An example of a stock of income is an established utility company.

Small-Cap Stocks

These shares are in companies that have a small market share. These are primarily new initiatives with the potential for expansion. Although small-cap stocks provide significant gains, they are more volatile than large-cap stocks. But these stakeholders should expect more price volatility and greater risk. Examples include ZIM Integrated Shipping Services.

Mid-Cap Stocks

Mid-cap stocks lie between small-cap stocks and large-cap stocks. These are successful developing companies with a potential track record, but with the intention of further expansion. Mid-cap stocks and stability appeal to a range of stakeholders. Mid-cap stock examples are Crompton Greaves Consumer Electricals.

Large-Cap Stocks

Large-cap stocks have the greater market share. These companies are market leaders with a proven track record of success. Large-cap companies tend to have less volatility than smaller-cap companies, offer more stability and potential growth for a diverse portfolio of investors. Apple and Microsoft are examples of large-cap stocks.

Concluding remarks

Stock market investment is a powerful way to increase your wealth over time, but a solid understanding and awareness of risk involvement are required. Investors can find the right stock for themselves according to their financial goals. The stock market offers diverse solutions for each income level. Investors can make informed decisions to understand the stock market conditions and capitalize on opportunities.