Stock ownership represents part of ownership in a company/corporation and gives one the privilege of earning from firm’s dividends and assets. The share market has better long-term returns compared to most investments. It is the leading online trading which is most profitable. Common stocks give one voting rights with no guarantee of getting dividends while preferred shares give one no right to vote but secure one dividend payment. Lately, Investing in the stock has recently been on the rise and done online. Trading stocks online are easier and affordable hence supporting the increase in capital investment. Initially, people used to do the transactions through a stockbroker like CMC Markets who would make all the buying and sell for them.
The settlement is a contract of exchange entered giving one lawful ownership of the shares for money when you buy or sell shares. It occurs within two business days after the trade. The sole profit of stock investing arises with the increase in the value of the company’s shares. As the cost increases, traders compete to own the company’s shares and bid up the sale price. A rise in company’s potential and value is called its fundamentals. One can wisely choose which stocks to buy based on two approaches namely;
- Structural analysis. This is relying on the documents from the company and which includes financial reports, balance sheets, income statements, company’s news release and quarterly and yearly earnings. Mostly this is available online via web search engines and on the online trading platform.
- Technical analysis. This is trying to detect swing of both profit and losses as they tend to follow a particular pattern which can be keenly learnt and be used to predict future price direction.
With online stock trading, there also exists brokerage, and it is wise to choose a broker rationally. A brokerage partner will directly affect your bottom line. Some stock brokers like CMC markets in U.K gives an insight to their customers on companies worth investing in (those that are growth oriented). While choosing an online broker, know their pricing, education and research researchers, security practices and service investment choices. For beginners, one ought, to begin with, a company that will provide personal advice on one’s investment. With experience, you get tools for advanced trading i.e. short selling and margin trading. Some sites like Yahoo! Finance have an excellent compilation of financial statement and history of the stock prices which provides insight into the company of interest. As it is daunting for amateurs, one can start with trading in penny stocks market which is offered by some companies. This means that one can practice leveraging the trends in the market. Beginners can use the following tips while making their first investments online.
- Do not invest money that you cannot afford.
- Stock markets are an unreliable source of income hence diversify your investments by only investing a portion of your money online.
- Do not give in to fears and buying too high. Wait for that opportunity to get lower entry point but don’t fear losing out on your trading money is a business same as the rest hence risk is involved.
- Make a plan rationally before investing and stick to it. Know when the right time for you to sell your shares is. This dictates for one not to make any trade if they have no ample time to research. Remember reading online articles does not make one qualify to purchase.
Trading stocks online also faces challenges same as other online trading activities which includes;
The ease and speed at which one can trade can lure one into buying too quickly or too often hence not allowing one to do in-depth research and putting at risk one’s money.
There are accessional delays on this systems due to increased demand and companies are racing to keep up with the pace. Online stock trading has faced delays in the confirmations of trade execution.
Stock prices move very fast demanding one to be extremely observant on the trends.
However, even with the vast insight of online trading in shares changing the manner of command executions, has not changed the principles of evaluating a stock. All company’s factors considered in while making investment decision has not changed.