How To Invest In Stock Market For Beginners – The stock market has terms and conditions applicable in the buying of stocks and shares. Also are the terminologies which will enable a newbie to acclimatize with the capital market environment.
One thing about knowing how to invest in stock market is that a lot of people have little knowledge of how things like this works, it is important to know that for an investor or some one who has intention of Investing in stocks, the fact is that these days it is very much easier than most people think.
The first step to take when you think of how to invest in stock market is to first of all open a brokerage account, that is only required when the individual doesn’t have an account already. Some unknown fact about the brokerage industry or knowing how to invest in stock market is that this industry has a very high competitive rate.
On this post on how to invest in stock market, we will be looking at other features of Stock Exchange, we will discuss securities, Shares, types of Securities available, as well as other features.
In the stock exchange there are words you come across, these words makes light on you knowing how to invest in stock market, now these words are however, these words are well known by financial personnel/expert or those who have a grounded knowledge of the capital market.
The truth is that the market carry’s a whole lot of baggage with it, these comes with losses by major players which come from inapt decisions made at the market, that’s why it has been described as thick.
This seriousness and many baggage which is synonymous with the capital market has made it a special branch of the economy which requires that it operate with its own language and behavior that are understood by the players of the market.
Despite the appearance of the technical vocation, the stock market is an otherwise simple business that is fit for and can accommodate everybody. Also it can as well be established that the more persons and companies the merrier.
I have decided to write down those terms that would needed in the day to day activities of the stock trading market in compliance with the tradition of the vocation the world over. This will be useful to the newbie as well as those who may want to buy stock or participate in any form, this will enable any new participant not to feel lost.
How To Invest In Stock Market – Current Stock Market
Before you venture into knowing how to invest in stock market, the investor needs to know the steps to follow in order to buy stocks at the market;
Here are the few things to know on how to invest in stock market;
- As an inventor you need to learn and understand the basics on stocks market trading
- understanding as well as studying the investment goals you want
- In risk management, their are risk averse as well as risk taker, hence the investor must determine the level of risk to take.
- Know the method of investment style as well as strategy to adopt
- Engage a stock broker who will provide advise on how to invest
- Always review investment portfolio before investing.
How To Invest In Stock Market – Stock Market, Securities, Share
The whole activities of the stock market center mainly around securities, it is important to note that these securities can as well be referred to as income that is yielding financial instruments showing a legal claim or holding in a particular property or investment.
The claim could be in the form of debt as in stock or bonds or in the shape of ownership of business concerned like in ordinary shares.
Types of securities available at the stock market;
- Short term securities; these type of stock has a maturity span of not more than one year.
- Medium and long term securities; this type of securities are those that mature between one or five years upward respectively.
Where Do We Buy And Sell Securities And Stock (Invest In Stock Market)
There are few commodities that are sold and bought in the stock market, these are securities market which is either the stock exchange house, stock-brokers office, or through individual and the commercial banks.
Short term Securities – Before having a great knowledge on knowing how to invest in stock market, short term securities is one of the terms one should know, the short term securities are referred to as the stocks that matures within a space of one year, they are low risk financial instruments, they include the treasury bills and certificates, commercial papers and bankers acceptance.
Medium And Long-Term Securities
Medium term securities are financial instrument that are designed to mature between one and five years, while those maturing after five years are often known as the long term securities, medium and long term instrument are in the range of debentures, bonds, loan stocks ordinary ad preferential shares.
Differences Between Ordinary And Preference Share
Shares are securities that guarantee that an individual has an ownership a business concern. Ordinary shares are consider to be as nominal benefits that ordinary shareholders of a company enjoy based on the profit made annually.
Preference shares are the superior claims by preference shareholder who, through limited to fixed dividends have superior claim over ordinary shareholders on dividends and also assets in the eventually of a liquidation.
The Users And The Suppliers Of Fund In The Capital Market
Funds are made available to the capital market by individuals, corporate bodies, states and local government, Charitable firms, pension funds, educational institutions and trade unions that want to invest their savings in a more durable channel.
The users of fund in the capital market are corporate bodies, and other governmental bodies and in most situation source fund for various projects through the capital market. Government securities are also referred to as bonds.
What Government And Corporate Bodies Use Fund For
The stock market helps the government raise money to fund the development of roads, bridges, schools and other social amenities, while on the hand corporate firms today engage the capital market to raise money to finance expansion in production capacity, acquiring new equipment, expansion of plants etc.
Importance Of Buying Shares
There numerous importance attached to the buying of share, these benefits include the following;
- Capital gain when sales of shares is carried out.
- The dividend income distributed to company’s share holders as profits for the years.
- Share certificates which are acceptable as collateral by banks.
- Right to vote at shareholders meeting.
- Right issues when offered by the company.
- Bonus or script issues which are additional shares distributed to existing shareholders.
Types Of Shares
There are so many types of shares available at the stock market that can be traded, these stocks can either be bought or sold at a given price, below are list of different types of preference share;
- Participant preference share – this type of shares are conferred on the holder the right and access to share with the ordinary shareholders the distribution of additional dividend at a pre-determined rate.
- Retractable preference share – This preference share gives the hold privilege to tender the shares to the issuing company for the redemption at the specific price at a given time.
- Redeemable preference Share – the redeemable preference share are shares that confers on the issuer all the required right to redeem the issue before the maturity duration as stipulated. This is possible through the giving of prior notice to the holder and usually done at a premium, this simple means that the holder will have to be notified beforehand.
- Government preference Share – these are those type of shares that can be exchange for a company’s ordinary shares whenever the owner dims fit, it is done on the basis of an exchange ratio at a later day and at holder’s wish.
- Cumulative preference Share – this preference share grants the holder the ability to get dividend unpaid in one year period at a letter period. A preference shares that is non-cumulative will not attract the benefit of retroactive collection of dividend. When it is a cumulative preference share, the holders get paid before ordinary shareholders.