If you have invested in shares or if you’re just thinking about it, this post is written for you.
When you begin buying shares, you must learn to manage them. For example, you need to know how to keep a check and balance on them, as they can be affected by many things. Therefore, you must be fully aware and take all of these forces under consideration.
Plus, if you’re a new investor you probably have high expectations about investing in the stock exchange. However, you could suffer large losses if you don’t understand how to manage your shares.
For this reason, you must learn how share trading works in the international markets. Only in this way can you learn how to make good money from the markets.
RELATED ARTICLE: UNDERSTANDING STOCK MARKET TRENDS: THE KEY TO SUCCESS WITH INVESTING
A Simple Guide to Your First Investment
When you purchase a share of stock in a publicly traded company, it simply means you’re loaning the company some of your money. In return, you get to have a some leverage with that company, as you become a stakeholder in that company.
As an aside, the words “stakeholder” and “shareholder” mean almost the same thing, but not quite. For the purposes of this article, however, we use these two words interchangeably.
Your leverage as a stakeholder is small if you only purchase a small number of shares. However, your leverage can be quite large if you purchase enough shares so that you own a significant portion of that company’s stock. You can get an idea of the amount of leverage your shares accrue to you by learning the details about the other shareholding entities of that company.
How to Plan for Your First Investment
As a stakeholder, you might also be able to benefit if the company should become more profitable. Once you have learned more about the stock markets and how they operate, you might decide you want to invest some of your funds in a certain company’s shares.
If you find that you need more money than you have on hand, contact a company such as Personal Money Network for short-term loans. Only do this, however, if you see potential in the company and the market.
Shares and Dividends
Some shares pay annual dividends. What this means is that if the company has a profitable year, they might pay out a percentage of that profit to their shareholders. Company managers and owners can, on the other hand, choose to retain those earnings and reinvest them in the company. In this case, no shareholders will receive dividends that year.
However, if the company makes a large profit and if their board of directors authorizes dividends, their shareholders will have accordingly large dividends. Also, the more shares you own, the larger your dividend check can be.
On the other hand, if the company should fail to be profitable during the year, you will not receive a dividend check, nor will any other shareholder.
For these reasons, you want to purchase shares of companies that have a history of profitability. At the very least, you should purchase shares of companies that show a good potential of being profitable.
If you hold onto your shares for year after year, you could receive dividends year after year.
How to Know If You Should Purchase Shares
At this point, you have likely begun to understand that we are talking about long-term investing, not short-term investing. What this means for you as an investor is that you must study the markets and learn how they work. You must also study the companies whose shares you wish to purchase.
Additionally, you must be willing to leave your shares alone once you have purchased them. In other words, don’t second-guess yourself. Also, don’t sell your shares after only a few weeks or months, hoping to make a quick buck. Sometimes this strategy might work for you. However, if you’re interested in building long-term wealth for your future, stick with a long-term plan and hold onto your shares.
The Best-Case Scenario
In the best-case scenario, you will have held onto your shares for many years. You will have built your portfolio by purchasing shares of several profitable companies. You will have held on through the ups and downs of the markets, all the while watching your wealth steadily grow.
Then, when it’s time for you to retire, you will sell your shares off bit by bit, but only if you need to. This is because by then your annual dividend checks should be supplying you with plenty of money for your living expenses.
Understanding the Risks of Investing in Shares
Investing in the stock market can be risky unless you choose your investments wisely. Also, you must learn to watch out for the scammers who lurk among online brokers. Learn to do business only reputable brokers who meet your standards for reliability and integrity.
If you study the markets and do your homework on the companies whose shares you wish to purchase, and if you invest on a long-term basis through a reputable broker, you will minimize your risks.
Important Signals to Heed
Additionally, you must become knowledgeable about current affairs. For example, an off-hand remark by a world leader can send the markets into a tailspin. In most cases, it’s best not to panic when these things happen. Usually the markets will recover and your shares will also recover. But this will only be true for you if you develop the patience to hold on through the markets’ ups and down.
With time and patience eventually comes wisdom. Likewise, study and awareness will eventually result in knowledge. Combine wisdom with knowledge and you will master the art of managing your shares on the stock markets.