By Arjun Chandrasekar.
The stock market is a very broad topic and can be confusing to many newcomers. If you’re interested in business and finance, you might have heard of big-shot investors like Warren Buffet, Bill Ackman, and Carl Icahn, but you probably don’t know how they became so rich off of simply investing. So we created this introduction and overview for you to learn investing terms and tips, and the benefits of investing.
Let’s start with a simple overview of stocks. Stocks are a measurement in ownership of a certain company/corporation. Only companies that are IPO, or have gone public, are able to allow the people to invest in them. People can buy multiple stocks, and these units are called shares. So when investors say they have 5 shares of Apple, or 10 shares of Tesla, that’s what it means. Holding a stock of a company gives the owner a proportion of the assets and profits, and the money they gain or lose mathematically correlates to how much stock they own. If, for example, you currently own 2 shares of Amazon which equates to approximately 6000 USD, then depending on the percentage increase or decrease that Amazon stock goes through, your investment value will proportionally change.
Now you might wonder how people buy or sell these stocks. Well, it’s not like going to a bank and paper trading them, instead nowadays almost all brokerages are online. This means pretty much all investors buy and sell their stocks online through various brokerages of their personal preference, of which some include Etrade, Robinhood, or Fidelity. These platforms have different advantages and disadvantages for trading stocks, some give free stocks for signing up, some provide no commission fees, while others load slowly or charge for each trade. So as an investor, it’s critical to research the pros and cons of brokerages before choosing your best option.
Now that we’ve gone over the terms and overviews of the stock market and investing in it, let’s talk more about the benefits. After all, most people get into investing primarily for its monetary gains.
Through investing, you’ll learn to understand how to properly analyze companies and corporations for their revenue, price-to-earnings ratio, beta, and more which is key for comprehension. You’ll better understand how to read graphs and predict trends. You’ll also learn how to mathematically calculate fast. The obvious implications of investing is the money you are able to gain, even if you start with merely 10 USD. And it’s true, investing can receive huge sums of money to the ideal eye, but it takes time to learn how to do this. You’ll learn how to manage a portfolio and budget wisely, and you’ll understand how to work with cash/credit transactions. Reading the news to see what’s currently happening with companies and the overall stock market will also help you to educate yourself on present-day issues.
So as you can tell, there are a lot of benefits, but there are also many downfalls to investing. Many times emotion can get the best of you, leading you to make bad decisions such as buying shares of a company that’s evident to go bankrupt or putting all of your savings into a risky stock. But if you do think things through and follow a set of guidelines for yourself to purchase wisely and make smart decisions, then you should be fine like most other investors. Now it’s up to you to figure out if investing in the stock market is the right decision for you, and if you need more tips or knowledge, check out our other blogs!