Stock Market: How to Navigate the Stock Market
A Beginner's Ultimate Guide to Investment Success
How to Navigate the Stock Market
The stock market is a challenging process to understand even more challenging to make money from it. It keeps on changing and no one can predict the exact result of it. But if you have an adequate stock market you can earn a very good amount and can have an active income from it.
In today’s article, we will discuss how you can start your journey in stock in the stock market and understand the risks that are involved in it, its benefits, and all the basic terms you need to know before diving into this market.
Table of content
|2||What is stock market?|
|3||Importance of stock market|
|4||What is the stock market exchange?|
|5||Types of stocks ( common v/s preferred )|
|6||Understanding Stock Ticker Symbols|
|7||Market Orders vs. Limit Orders|
|8||Steps to start you stock market journey|
What is the stock market?
The stock market is a marketplace that comprises investors, companies, and shares. In the stock market companies raise capital for their business sell some shares of their business and after accessing the company’s capabilities of profit and losses people buy those shares. Buying a share of the company helps the business to work effortlessly and gives a sense of ownership to the investors.
The investors after buying the share become a part of the company and also they will have a share in the company’s profit and losses. Hence if you analyze the stock market sharply you can able to get a good rate of return from your investment.
Importance of the Stock Market
To expand any business capital is required and it is not possible to maintain a big company as well as to put a large amount into its expansion. Hence these companies sell the shares of their company so that they can get the money for research and development and in return their company’s profit is also shared with the investors.
Human needs can never be fulfilled and sometimes our needs are not fulfilled by our regular source of income. This is when the stock market can help us to get extra income from our savings by investing in leading stocks and in return getting satisfying ROI.
Stock are high in liquidity which means you can easily buy and sell them anytime you want during trading hours on the stock exchange. Liquid assets or high liquidity means those assets that you made from your income that can easily be converted into cash when you need it in an emergency.
The stock market also ensures that the investor can have a wide variety of options to choose from. This will help all the sectors to grow as well as give the investor a fair chance and a sense of security. if the stock in one sector performs poorly, the investors will have a stock can another sector that might do well and their loss can be cured.
What is a stock exchange?
A stock exchange is an organization that lies in the stock market. It is a regulated market that ensures there is no fraud and cheating. They have some pre-defined rules which help to save the rights of both investors and companies. Every country usually has its stock exchange with different rules.
Some examples of the stock exchange are:
- The New York Stock Exchange (NYSE)
- London Stock Exchange (LSE)
- Tokyo Stock Exchange (TSE)
Types of Stocks (Common vs. Preferred)
Common stocks are very commonly available in the market for investor as their name suggests. They give a sense of owning a piece of the company and they have the right to be involved in some of the crucial decisions of the company. It involves a high amount of risk and dividends are not compulsory. Their main advantage is that their value keeps on growing and investors can expect a good gain from them, Also they are very high in liquidity.
Preferred stocks also provide a sense of ownership but you don’t have the right to involve in any decisions of the company and the company is not liable to take your advice. They are less liquid as compared to common stocks but involve lesser risk. People who want to have a secure income can opt for it as they will receive predicted dividends before common stock investors. Preferred stock values increase but not to the same extent as common stocks.
Understanding Stock Ticker Symbols
A ticker symbol is like a short or nickname of a company which represents that the particular stock is from that company. This can also be termed as a code or special word that represents and helps the investors to find the company easily in the vast pool of the stock market. For example, Apple Inc.’s ticker symbol is ‘AAPL’ which helps its potential investors to easily find the saying, and without saying the full company’s name they can use that symbol while buying and selling that stock.
Use in Trading
Ticker symbols are used when placing stock orders. They help investors easily identify and trade the stocks of their chosen companies.
These symbols are used to make the task easier for the people involved in the stock market. They can now easily place orders or trade the stocks by easily identifying them.
Market Orders vs. Limit Orders
Market orders are more like ordering the stock right away without conjuring the price point. Imagine when you go shopping and there you want something, you simply buy it without caring much about the price. The same goes for the stock market when investors make a quick decision and buy the stock there itself. The advantage is that you can be first in the race and get get good ROI.
But sometimes due to quick decision making you need to take care of aspects otherwise you might end up paying more for the stocks.
Limit orders are just the opposite of market orders here you can select the price at which you want to buy and can also put restrictions to not sell your stock below a certain price.
Steps to start you stock market journey
Start with understanding the stock market, stock exchange, etc. The first step you excel in anything you dive in is to have an ample amount of knowledge. You are new in this journey and many people might fool you hence you must do your research. You can read books, join seminars, read blogs, and also by watching videos.
Set Clear Financial Goals
To make your trading strategy you must need to know the objective behind doing this. You should determine carefully the reasons such as retirement, extra income, or mainstream work. This will help you to make correct decisions.
Establish a Budget
Before investing in stock you should make sure that this is the specific amount only for trading and that It will not harm your day-to-day expenses. As the stock market is quite risky hence you should always keep yourself on the safer side.
Create an Emergency Fund
You should not forget to make an emergency fund that you can utilize during periods of losses and unexpected expenses.
Choose the Right Broker
Select a reputable online brokerage that suits your needs. Search for low fees, user-friendly trading platforms, research tools, and educational resources. You should also compare different brokers to find out the one that matches your trading goals.
Open a Brokerage Account
After completing the application process you can open a trading account. During the process of account opening, you will need verification documents and need to provide your personal and financial details as per the rules.
Fund Your Account
Now you can start by transferring funds that you have decided to invest in your trading account. Every broker these days offers various options for transferring funds. You can choose whatever suits you from bank transfers to online payments.
Practice with a Demo Account
As you will be extremely new in this field, to help you many brokers have the facility of demo or paper trading where you can first get the practical knowledge through the virtual money. This will also ensure that you don’t end up wasting your hard-earned money.
Keep Learning and Monitoring
You need to have a great presence of mind and adequate knowledge. Keep learning about market trends, new companies, and the ones you have invested in. This will help you to keep up with the latest haggis and you will able to get high ROI.
Practice Risk Management
You should also implement risk management techniques, like setting stop-loss orders to limit potential losses. Always keep in mind to never invest more than you can afford to lose, and avoid making impulsive decisions.
Q: Is investing in the stock market risky?
A: Yes, Investing in the stock market is risky as it is subject to change and no one can predict the exact result.
Q1: How much money do I need to start investing in stocks?
A1: It fully depends on you and your budget, the key is to must remember that the amount you will invest is taken after fulfilling your living expenses.
Q2: How do I choose which stocks to invest in?
A2: While selecting a stock you must research and understand fully before investing your money. Some key factors that you should evaluate are the company’s financial health, growth prospects, industry position, and management team.
Q3: When should I sell a stock?
A3: This decision depends on your financial goals, if the stock reaches your targeted amount then you can sell it. If you think that the stock can go even up than your targeted value you should wait and then sell it later on.
Q4: Should I consult with a financial advisor?
A4: Consulting with a financial advisor can be helpful for a beginner as they can guide you and help you to make correct investment decisions.
Understanding everything about the stock market in one day or from a single blog can be challenging but we hope that you got to learn the basics of the market and how it works. We must recommend you be patient in this journey and not make emotional decisions while trading. We hope this blog adds value to your life. Let us know your views in the comment section. Happy learning.