How To Invest In Stocks
Stocks are traded in the stock market that comprises on Stock Exchanges (SE) and Over the Counter (OTC) Market. In these markets, shares of the listed companies are publically traded. Capital Market and Equity Market are the terms that are used interchangeably for the Stock Market.
There are several options available to make an investment in the stocks. The investment could be made either in the Exchange-traded Funds (ETF’s) or directly invest in shares assets. The stock market usually offered the following diverse range of asset options for the investment including;
- Commodities (like crude oil, gold, agricultural products etc.)
- Equity Stock (Shares of the companies)
- Debt Instruments (Debentures & Bonds etc.)
- Futures & Options trading
The first step you need to take is to set up a brokerage account with a broker in order to proceed in the matter further. The selection of the right broker is an important element of success in the stock market. The factors that are usually considered in the selection of a broker are based on cost effectiveness or the rate of brokerage commission and quality of services they offered.
Once the brokerage account is opened that enables the investor’s to start trading in the stock market. In order to succeed in the stock trading, it is important for the investor to build the solid awareness of the stock market operations and how the investment works in the stock market. The price of the share depends on the numerous factors including the financial health of the company, upcoming projects that company going to undertake, upcoming Government policies relating to the industrial sector, company’s competitor’s steps, acquisition, imminent mergers & joint ventures and so on. A critical analysis of these factors is necessary before the investment in the stocks of a company.
There are several means of placing an order with the stock broker. An order for buying or selling the stock can be made by the investor via telephone call, e-mail, text and with the help of online stock trading, an investor can place the stock trading order himself by using the brokers trading platform.
The next step is to make your mind how many shares you want to buy and traditional you need to inform your broker regarding the buying quantity of the shares by specifying the company. An investor can place the order instructions to the broker for instant buying by taking into account the current market price of the share or the trading can be made by setting the conditions regarding the price and time duration of the order. For example, if you want to buy or sell a lot of 100 shares of General Motors when the price of these shares reaches to $59 during the day. The stock broker will follow the instructions and perform the transaction on your behalf once these conditions met. On the other way, you can set these conditions on the trading software of the broker, if you preferred the online trading.
Stock markets are driven by fundamentals and stock prices follow a random path. Similar to a coin toss, stock prices are unpredictable. The investor’s has to establish a robust system of risk management in order to protect the investment from loss and maximizing the profit in the ever changing environment of the stock market.