Are you looking to generate extra income or create a safety net for your retirement? For those who answered yes, buying and selling stocks is a great way of doing so. Just keep in mind that trading stocks can be quite confusing for some people. If you’re just getting into it, there’s some fundamental knowledge that you are going to need to acquire. Below is an overview of how to go about buying and selling stocks.
Buying stocks means you’re apart of the company
If you buy a stock, you are purchasing a part of a company. Therefore, if the company is predicted to have an increase or decrease in profit, you have the right to know. With that said, it is up to the individual to stay in contact with the company as they will not seek you out personally.
Stocks grow and increase in value
Most people who invest in stocks have the goal of capital appreciation, which is the value of an asset, based on the rise or fall of the market price. Stocks grow in terms of capital appreciation, but they also grow in value based on dividends, which is when companies pay dividends (payments) to its shareholders.
Stocks run on a boom/bust cycle
In the stock market, an individual’s stocks have the chance of either rising or falling in value. As a result, there are two ways of purchasing stocks based on the inclinations of the market. First is ‘value investing’, which is when you purchase a stock that is low in value. On the other hand, if you are purchasing a stock that is increasing in value, you are conducting ‘momentum investing’. Choosing a method of investment is based entirely on an individual’s investment goal and the level of risk that they want to take. That said, both methods are thought to be extremely beneficial.
Stocks are taxable
Most beginner investors do not know that stocks are taxable. Unless you own stocks via a retirement account, expect to pay taxes on your investments. Additionally, you will pay taxes on any benefits that you acquire as well as the dividends that you receive from company’s.
Stocks can be erratic
As mentioned previously, the stock market runs on a boom/bust cycle. This means that stocks can fluctuate during a short period of time. In some cases, a stock can plummet only to rise again shortly after. As a result, stocks are seen as a risky investment, however, there are multiple benefits to stocks being as volatile as they are.
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