Investments are the main way in which rich people maintain and expand their wealth. With today’s electronic trading methods, it has become possible to anyone to profits from the markets. And although investing requires constant learning, it also provides great rewards for traders, including leverage, high profit margin, and the possibility of growing your investment quickly.
Investing in the market is facilitated by a large number of companies, also called brokerages, that provide access to the market. For example, it is now common to have companies providing trades in stocks for as low as $5. These companies have automated systems that allow anyone to buy or sell stocks in the markets at real time.
The Great Opportunity of Investing
In the past, it was relatively difficult to participate in the stock market because of the high cost of performing the trades. For example, one would need to call a stock broker to say how many shares were to be traded. Brokers would charge a lot of money for this service, therefore it didn’t make sense to buy less than a few thousand dollars worth of stock.
With time, however, the Internet has make it possible to anyone to trade. My first trade, for example, consisted of just one stock of a company. With low commission prices, it is very easy to buy even a small number of shares without losing too much money in the process.
Although transaction is easy these days, there is always the hard side of deciding how to trade in the markets. The problem is that trading requires a lot of knowledge about how a company is going, how it is going to perform in the future, and how its competitors are performing. Without this knowledge, it is difficult to do informed decisions, which can represent a lot of risk.
Techniques for Your First Investments
For someone starting to trade stocks, I think there are a few suggestions that can make your life a little easier:
– Start with well known companies, such as Microsoft, McDonalds, Coca-cola. These companies may grow slower than smaller companies, but they are less susceptible to localized problems in the market. For example, Coca-cola operates is most countries. So, even with a recession in the US it can still do well in other economies.
– Avoid trading stocks during the period when companies reveal their earnings. There are several factors that influence prices during that period, and only pros really know what to do during these times (even pros lose money sometimes during earnings season). You should try to buy and sell only when these earning calls are not a big part of the movement in the stock.
– Buy stocks with long term prospects: If you want to start in stocks, the best thing to do is to buy companies that are doing well in the long run. It is not so hard to see that a company is well run, since it will show constant growth. These companies provide the best return.
There is a lot of people that make money betting on short term changes. While sometimes they get lucky, sometimes they lose a lot of money. Losing money may be discouraging for a new investor. It is the kind of event that make people to avoid buying stocks, because it seems so volatile. However, there are still companies that are doing really well and can provide constant gains for your investment.
If you do your homework and invest in good companies, you should be able to grow your money in the same way that rich people do. Combined with other money generation techniques, financial investments may be your best passport to a wealthy future.