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Investment Strategy and The basics of Stock Trading

What is stock trading?

Stock trading is something that many people have heard of, but it is often permeated with lengthy technical articles or under the impression that investing and trading stocks requires large up-front financial commitments and high risk of loss. The truth is that investing in stocks is a very diverse task available to people of all income levels that with a little work can be adapted to all risk levels. Investing in the stock market can be a very enjoyable hobby for the average person, and while it may not make you rich, it can be a fun way to supplement or increase your income in your retirement plans.

Before you are comfortable with investing, it is important to understand exactly what it means to trade (buy) stocks. Simply put, when you buy a stock, you have bought a small percentage of the company; When a company does well, its share price rises, its shares become more valuable, and when it performs poorly, the value falls. To help illustrate this concept, consider this simple hypothetical example:

Company A is a bakery in which I decided to invest. The company owns a total of 100 shares (i.e. 100 shares equal 100% ownership of the company), of which the management (also known as own shares) owns 60 shares and the remaining 40 are available for purchase in the stock market. You decide to buy 1 share of Company A and pay the market value of $ 5.00 per share; Now you are the owner of the company with 1% with an investment of $ 5.00. After a few months, the company performed well and exceeded sales expectations (possibly due to the holidays or an ad campaign) as a result of its stock rising to $ 10.00 per share; In this case, you have now earned $ 5.00 (the total amount you paid was $ 5.00, but your share is now $ 10.00). And vice versa, if the company's sales are weak and the value drops to $ 2.00 per share, you will lose $ 3.00.

The example above was oversimplified, but we hope it gives you an idea of the basics of buying and valuing stocks. The general idea is to buy a low stock (in the example above $ 5.00) and sell it at a profit (in the example above, $ 10.00 for a profit of $ 5.00).

How to buy stock?        

For a novice or casual investor, one of the best ways to start buying and selling stocks is to open a brokerage account through an online platform. These banks offer many options for investing, but a simple account is a good start, as they offer the lowest fees and commissions for the average investor. There are many platforms to choose from, a review of some of the top companies, and some great information for beginners can be found on Tokenist.

Investment strategy

Now that you have an idea of what a stock is and how to start buying and selling it, the next step is to define your investment strategy. A great way for the novice investor is to take a small amount of money, invest in various long-term, low-risk stocks, and add a little from each salary based on your budget and comfort level. Low-risk stocks are companies that are considered stable and that rise slightly in price for long periods. These stocks generally have less risk of losing value and allow investors to generate income slowly over time. With any investment strategy, investing in multiple companies and monitoring their performance is the key to success.

One of the first tasks of first-time investors is to decide which companies they want to invest in and which are compatible with their objectives. Most experts advise new investors to choose companies from industries they know or are part of; This gives you the advantage of being familiar with industry trends that could affect success or failure. The next step in creating a portfolio of stocks is to determine which companies will buy stocks by identifying opportunities that you can comfortably tolerate and whose level of risk matches your objectives. Signing up for an industry publication like The Oxford Communique is a good place to start looking for companies to consider because it gives you the benefit of expert opinions at the lowest cost. In addition to other services, The Oxford Communique publishes a monthly newsletter written by industry experts that focuses on lesser-known companies with reasonable stock prices and high potential for an increase in value. A review of the Oxford Declaration can help you increase your knowledge of this sector.

Final word 

Investing in the stock market can be a rewarding and profitable way to build wealth but no stock is without risk. All beginning investors should carefully evaluate what they can comfortably invest and seek information from multiple sources.

Also Read: All You Need To Know About SBI PPF Account

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