How to Invest in Common Stocks in the Stock Market

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The Stock Market

Investing in the stock market is a risky business. However, there are many areas in which one can invest and either reduce or increase one risk. Usually, the higher the risk, the higher the reward. The investment areas are options, mutual funds, common stocks, preferred stocks, government bonds, etc. Government bonds and mutual funds are the list of risks. However, the returns on these investment instruments are meager. Returns usually range from about 3% to 5%. The area in which I am specialized is common stock, and this article focuses on investing in common stock. Investing in common stock is more risky than government bonds and mutual funds. However, if you do your homework properly and thoroughly, you will reduce the risk significantly, and the rewards are usually great.

Getting Prepared to Invest in the Stock Market

Before investing in the stock market, you must open an account with a reputable stock brokerage company. It is preferable to use a bank that has a brokerage division. The reason for this is for you to have easy access to your money. That means you can instantly transfer money from your brokerage account to your bank account. Otherwise, money must be mailed to you when you withdraw from your brokerage account.

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Next, you need to sign up to have online access to your account. After this, you must have real-time access to the stock market. Most reputable brokerage companies will provide this service depending on your deposit. The more money you deposit, the more benefits you will get for free. Note – You do not need 15 minutes to delay real-time stock prices. This is no good to you. It would help if you had real-time stock prices. Once this is set up, you are ready to rock and roll.

Common Stock Selection

The Next thing you need to do is find the stocks you want to invest in. This part is time-consuming. I discovered my supplies as follows: at the end of every business day, I looked at the stock market of interest and all the best-performing stores for the day. Doing so will give you a stock code necessary for buying, selling, researching stocks, etc.

The next thing you want to do is to research each stock that you are interested in. You want to look at financial statements and balance sheets for five years. Financial information will tell you if the company is making or losing money. Also, a financial report shows you a company’s sales and expense trends. Therefore, you can determine if a company is growing or not. The balance sheet will tell you if the company has money and assets or is in debt. If a company’s liabilities are 25% of all its assets, it is financially sound. However, if a company’s liabilities are 75% of its assets, it is in serious financial debt and will be a hazardous investment. To succeed in the stock market, you must be knowledgeable about financial statements and balance sheets.

Next, you want to research what a company does as a business. Also, you want to know who the stock’s holders of a company, who is the CEO(chief executive officer), who is on the board of directors, does the company pays a dividend, etc. Also, you want to check all the news headlines about a company for about five years. After all this is done, and you are satisfied with the company, you put this company in your portfolio. You do the same procedure for each company that you are interested in. Note – You have to diversify your portfolio. Invest in companies that are in different kinds of businesses. For example, invest in companies in various business segments – mining, manufacturing, services, etc. You are ready to do business once you have several companies in your portfolio.

Monitor Stock Price

The trick to making money in the stock market is to buy low and sell high. Therefore, timing is critical in the stock market. All stocks have a pattern. There are peaks and valleys in every store. Certain news will drive stock prices down or up. These are the waves that you have to look for. Therefore, you buy on the low and sell on the high. You will have to create a stock chart to monitor a stock price. Your brokerage company may provide this service. Look for the stock chart.

You may also find stock charts on Yahoo Finance.com, StockCharts.com, and similar websites. Once you find the service, all you have to do is enter the stock code. Next, you will have to select a time frame. You can choose the maximum time frame and see what the stock has been doing for several years. Next, you can select five years and see what the store has been doing for the last five years. You can play around with the stock chart to get a feel of the store. Ultimately, you want to figure out the stock’s low and high prices. Analyzing a stock chart is an essential aspect of investing in the stock market. Acquiring this skill and becoming very good is important for making money in the stock market.

Buying and Selling Stocks

Once you have done all your research and are satisfied that you are in a good position to buy, you will buy. That means you go online and bid to buy a certain amount of stocks at a certain price. Once your request goes through, you are now a part-owner of a company. All the information about your purchase will be available to you online. Note – the brokerage company will charge you a commission for buying and selling stocks for you. Also, buying stocks in large volumes is the key to making money in the stock market. You do not have to buy all the stores in one purchase. You can buy in segments. That means, if you want to buy 2000 shares, you can purchase 500 on four different occasions – buying leverage.