What You Need to Know about the “Stock Market”

Stocks, or shares of a company, represent ownership equity in the firm, which gives shareholders voting rights as well as a residual claim on corporate earnings in the form of capital gains and dividends. Companies stocks are exange in the stock markets, that are where individual and institutional investors come together to buy and sell shares in a public venue. Nowadays these exchanges exist as electronic marketplaces. Share prices are set by supply and demand in the market as buyers and sellers place orders. Order flow and bid-ask spreads are often maintained by specialists or market makers to ensure an orderly and fair market.

Main Advantages

Investment Gains: One of the primary benefits of investing in the stock market is the chance to grow your money. Over time, the stock market tends to rise in value, though the prices of individual stocks rise and fall daily. Investments in stable companies that are able to grow tend to make profits for investors. Likewise, investing in many different stocks will help build your wealth by leveraging growth in different sectors of the economy, resulting in a profit even if some of your individual stocks lose value.

Dividend Income: Some stocks provide income in the form of a dividend. While not all stocks offer dividends, those that do deliver annual payments to investors. These payments arrive even if the stock has lost value and represent income on top of any profits that come from eventually selling the stock. Dividend income can help fund a retirement or pay for even more investing as you grow your investment portfolio over time.

Diversification: For investors who put money into different types of investment products, a stock market investment has the benefit of providing diversification. Stock market investments change value independently of other types of investments, such as bonds and real estate. Holding stock can help you weather losses to other investment products. Stock also adds risk to a portfolio, as well as the potential for large, rapid gains, helping investors avoid risk-averse or overly conservative investment strategies

Main Disadvantages

There’s no guarantee you will actually realize any sort of positive return. If you have the misfortune of consistently picking stocks that decline in value, you can lose money, even over the long term.

How Much Money One Have to Invest

Thanks to the 8th wonder of the world, compound interest and modern online brokers with no (or less) fees and overall expenses today it is possible to start investing with as little as $100.

The Magic of Compound Interest

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.

That means that if you make today an investment of $10.000 with a monthly 5% interest rate it will grow to more than 1 Million Dollars in less than 10 years, only by making a regular deposit of $150 and being patient. 

Conclusion

Investing is not just for the wealthy. Anyone can save a small amount of money from their salary and invest it in stocks, bonds, commodities, ETF’s and CFD’s that allow you to obtain the benefits of the shareholders of a company with reduced investment, amazing access to all the data, graphics and information with virtually no expenses. There has never been a better chance for normal people like you and me to get involved in the market, read and learn everything about the companies, and achieve financial independence.