Any investment is an active activity in the field of finance. In essence, any investments reflect the most important principles of life for any adequate person – to live better in the future, one should make maximum efforts now.
There are a huge number of investment tools. Some of them allow you to earn money in the short term, others in the long term. If you consider stocks, they are an investment tool that works for the future. In order to understand the procedure of such attachments, you must first familiarize yourself with the concept.
Shares are securities confirming the right of their owners to part of the property of the issuing company, as well as part of the profit in the form of dividends.
Shares are sold through the stock exchange. However, a private person does not have the right to independently carry out transactions in such a market, he will have to act here through intermediaries.
There are 2 Ways to Earn From Investing in Shares
- Receiving dividends is the simplest and most understandable option. In this case, the owner of capital simply acquires shares and receives part of the net income of the issuing company. However, this option is not always promising in the long term;
- Stock market speculation can bring a much higher income than from the payment of dividends. The main principle of making a profit here is as follows: buy securities cheaper↓, then sell them more expensive↑. In order to obtain maximum profitability in this case, it is important to study the stock market, analyze the situation and make reasonable forecasts of the future course movement.
Since in most cases transactions with shares are carried out through brokers, it is important to have an idea of the principles of operation of such companies. In addition, the right choice of an intermediary is of great importance. This issue will also be addressed in the presented article.
How to Choose the Right Stocks for Investment?
When deciding which stocks to invest in, an investor must take into account a huge number of factors. Since shares are securities of a certain issuer, their profitability largely depends on the company’s performance.
Economic analysis of the organization’s activities helps to evaluate and understand:
- how effective was the company’s work in the reporting period;
- the amount of profit received by it;
- what amount was allocated to the payment of dividends to shareholders;
- what amount of funds was sent to reserves;
- does the company have any cash at all;
- whether the company has prospects of making large profits in the future, or whether it is running for wear and tear.
Data for company analysis can be taken from only 2 reports:
- balance sheet;
- profit and loss statement.
The evaluation of the image of the issuer is also of great importance. Most often, scandals and gossip surrounding one company may indicate that its shares will depreciate in the near future. Even if this does not happen, the rate will almost certainly drop sharply.
The level of liquidity of shares is also of great importance for investments. It means the ability of shares to be exchanged for money quickly and without loss. In other words, such a security can be sold at any time at a price not lower than the one for which it was bought.
Analysis of all the factors presented above helps the investor to choose the most suitable shares for investment. This will help to achieve long-term investment and get the maximum profit from the invested capital.
How Much Can You Earn by Investing in Shares?
In fact, everything is simple – the maximum income is not limited by anything.
With the help of active online trading, you can achieve profitability of up to 300% per year. However, if we consider the long-term time period, the annual return in most cases will not exceed 50%.
The named numbers are not final. History knows many cases when people managed to earn a huge amount of capital just by investing in shares in just a few years. To do this, they bought securities in a crisis and sold them in periods of calm.
In fact, earning income as an average investor is not difficult. It is enough to spend just a few months on intensive preparation for trading in order to ensure a profit of about 30% per annum.
However, it will take decades of hard work and countless hours of thorough market analysis to invest money in stocks like a pro with above-average returns.
It turns out that it is possible to achieve profitability in the amount of 30% per annum by learning to conduct a competent analysis of the market situation, timely getting rid of unprofitable and overvalued shares.
The amount of income depends on the investor’s ability to correctly choose the moment to fix the profit, and on the high↑ speed of reaction to losses – the amount of subsidence of the investment account.
Why Invest and is it Right For Me?
A share is a fractional security that indicates ownership. When you buy stock in a company, you are buying a stake (even a very small one) in the company. You can receive income from the purchase and sale of shares or dividends – part of the company’s profit based on the results of a certain period.
A bond is a debt security, according to which the issuer – the state or the company that issued it, undertakes to pay a certain percentage in the future.
The easiest way is to buy securities, and after a certain time sell them at a higher price – and make money on this. The main thing to remember is that profit is not blind luck, as in a casino, but the result of thoughtful actions. Not a game, but a job.
Not only owners of large capital can invest money in shares, but also ordinary people. It is important to start investing right now in order to become a successful investor in a few years and bring your financial well-being closer.