Investment Guide
Stock Market Investment Guide
guide to investment
How does the stock market work? The stock market, simply put, is a market where companies and entities can finance their operation by offering shares of company stocks, bonds and derivatives to the public. Currently there is a huge worldwide investment market valued at over $350 trillion U.S. The next thing that you will need to learn about when you learn how the stock market works is how stocks, bonds and derivatives are offered to the public. There are several national and international markets that you can find investment product listings. When you view the listings of a particular stock market you will see that each stock, bond or derivative will be represented by a trade symbol. You can use this information to make decisions on what stocks to buy and what stocks to sell.
Investment Guide for First Timers
(1) Understand your goals
What are your expectations from the investment. This will also help you in determining what investments to be made and money to be put in.
(2) Make informed choices
Before investing, you should know every detail of your investment. Do some research before you plunge in.
To get you start safely, I have added some more tips:
(1) How much to invest
A very important parameter. This determines the best investments for you and the best method of investment-whether appointing an investment advisor or doing it yourself.
(2) Diversification
Diversification is the process of investing in several different types of investments, and in several different types of industry sectors. A diverse investment portfolio might contain stocks, bonds, and indexes, and will have money invested in several different sectors and industries instead of just one. This allows your investment portfolio to stay relatively level, regardless of the periodic dips in value that companies and sectors tend to take.
(3) Risk analysis
Share market is extremely volatile and they carry inherent risks. Market patterns are the result of the cumulative effect of several cycles. You should do some research on the performance of shares in the past and study the patterns.
Five Important Features of Common Stocks
(1) Limited Liability
Common stockholders have limited liability, in other words, their liability is limited to those stocks or shares. They cannot be forced to pay anything out of their own money in the event of bankruptcy. They are fully protected against any financial obligations incurred by the organizations.
(2) Liquidation Rights
If a company goes bankrupt and liquidates all its assets, the common stockholders have the right to receive their share of sale proceeds. However they are the last to receive money after the creditors, bondholders and preference stockholders are paid.
(3) Preemptive Rights
If a company plans to issue new shares, existing stockholders have the rights to subscribe to new stocks, often at lower prices, before they are issued to the public.
(4) Voting Rights
Common stockholders have the rights to vote in general meeting of the company. Each stock carries the right to one vote. Stockholders can exercise control by electing the board members, who will oversee the major decisions and policies implemented by the management.
(5) Dividend Payments
Common stockholders are entitled to a share of the profits in the form of dividend. However the amount of dividend payments is not based on a fixed percentage rate, it is recommended and decided by the board of directors.
