Sooner or later every investor who is ready to invest his savings and savings asks himself how to make money on stocks. Even if you have not tried to make money in the stock market, you have probably heard from your elders in the family that they had or have some shares.
Indeed, immediately after perestroika some citizens bought securities: stocks, bonds, privatization checks of banks, factories, new corporations, etc. As a rule, Soviet people of that time had no idea how to make money on shares – they were told to buy them, so they bought them. As a matter of fact, many people still have these shares in their drawers, and their owners often do not even suspect that these papers are worth something. Of course, this is a completely wrong and even pernicious pattern of behavior.
Stocks are an interesting, effective, and accessible stock market tool for just about everyone. And for private investors, they are doubly interesting: on the one hand, with the help of a broker, one can operate on shares and receive income from their sale–purchase; on the other hand, stocks pay dividends, which can sometimes be more profitable than a bank deposit.
Making money on shares. Advices of experts
Shares as an investment instrument seem simple and maximally safe. Indeed, it is difficult for an investor to go broke or sustain a deep loss on shares. Nevertheless, it’s not as simple as it seems, so it’s worth listening to expert advice.
- Form your investment goal. Plan your desired income or percentage at least within the “no lower” framework. So you can not just make transactions, but review your portfolio and strategy, moving towards your goal.
- Be flexible – in case the external situation in the economy has changed, something has happened to the issuers of your securities, unexpected risks have emerged, do not be afraid to review your stock portfolio, even with a small loss.
- Manage risks – form a securities portfolio of several assets, combine securities with different maturities, risks and yields.
- Don’t avoid foreign issuers – there are many interesting companies on the market today (especially in technology) that can provide growth in returns on their shares.
- Don’t trust your intuition, especially if you are a beginner. Buy shares based on an analysis of the situation inside the issuer and taking into account a lot of indicators, not on the principle of “this company is well–known and will not collapse, because everyone needs oil. It is best to use the services of a personal broker or a financial advisor.
- Monitor the movement of your assets and your entire portfolio in the stock market on a daily (or preferably hourly) basis, count returns.
- Note specific points of fall or rise in your stock prices so that you can understand patterns later on.
- Listen to and analyze the background: information about issuers, indices, the market as a whole. Collect and find statistics, ask your broker for data. That way you can make informed and sound investment decisions.
How to make money on stocks and securities
So, we’ve already mentioned how you can make money on stocks.
Now let’s summarize:
- get dividends – regular payments to shareholders (distribution of the company’s net profit to shareholders);
- make money on the rise: buy shares of companies cheap and sell them at a high price after a while;
- earn on a fall: borrow shares from the broker, sell at a high price; when the price falls, buy them back, return to the broker, stay in profit
And with all the tools and detailed analytics, picking a profitable stock is no problem. The main thing is not to forget that not everything that is on the peak is profitable, and not everything that is on the decline is unprofitable. However, private investors rather quickly learn the laws of the stock market and learn to act independently. The main thing is to take your time and analyze.
