The stock market is known for being quite complex, filled with jargon, and with a high level of risk. However, with some knowledge and research, anybody can get started with investing in stocks and potentially make a profit from it. If you are a beginner to stocks, keep reading to find out more about the basics of stock market investing and how to get started. 

What are Stocks?

Stocks are essentially shares of ownership in a company. When you buy a stock, you’re buying a small piece of the company and becoming a shareholder. Once you are a shareholder, this gives you the right to vote on certain company decisions and receive a portion of the company’s profits in the form of dividends. How much your stock is worth may rise and fall depending on the company’s success and the overall stock market performance. 

How to Choose the Right Stocks to Invest In 

There are several factors to consider when choosing the right stocks to invest in. Some of the most important things to think about include:

• Company financials: Consider things like revenue, earnings, and the overall financial health of the company. Companies that have strong financials and a positive outlook are generally considered to be wise investments. 
• Industry trends: Think about the overall health and growth of the industry the company operates in. If it’s in an industry that’s performing well and seeing a lot of growth, the stock is also more likely to perform well. 
• Management: Who leads and manages the company can have a significant impact on its success. Spend some time researching the track record and background of the management team to get an idea of the direction they are taking the company in. 
• Dividends: Some stocks pay out dividends, which are regular payments to all shareholders. If you’re looking for an investment that will provide you with a steady stream of income, these stocks might be a good choice. 

How to Start Investing in Stocks

Once you’ve got a clear understanding of what stocks are and how to choose the right ones to invest in, it’s time to get started. Some of the main steps to follow are:

1. Open a brokerage account: To start investing in stocks, you’ll need to open a brokerage account with a stockbroker. You can do this online or through a traditional brokerage. Spend some time researching your options and comparing the various fees and services before you decide. 
2. Fund your account: You’ll need to transfer funds into your account to start investing once you have an open brokerage account. You can do this in several ways, including transferring money directly from your account or setting up automatic monthly transfers. 
3. Choose your stocks: Once your account is funded, it’s time to choose which stocks you want to invest in. Consider the various factors outlined above, stay updated on volatility, and do your research before you decide. 
4. Place an order: Once you’ve chosen which stocks to invest in, you can place an order. There are several types of orders you can choose from including market orders, stop-loss orders, and limit orders. 
5. Monitor your investments: Once you’ve invested, it’s crucial to regularly monitor the performance of your stocks and make adjustments if necessary. 

The stock market is known for being complex, but with a basic understanding of how stocks work, how to choose the right ones, and how to invest in them, anybody can become a successful investor. 

Investing in the stock market can be tricky, especially if you don’t know what you are doing. Without a proper strategy, you will either lose a lot of money or gain even more. But, would you want to ride on your luck? Wouldn’t it be better if you had control over it?

It would. And that’s why I have created a five-step guide to investing perfectly in the market. In case you have something else to include, please comment below. I’ll certainly consider it.

How to Invest?

When it comes to investing, you should always keep your focus on a single space, especially if this is your first time. And make sure to follow the below-mentioned tips closely too -

1: Define Your Goal.

Ask yourself: why are you thinking about investing in the stock market? Do you want to get a lot of money from it and build for your retirement? Or do you want to save for the education of your kid? Is there something else you want to buy with the money?

The rule of thumb is not to invest a certain amount of cash that you might require in the next three to five years. And always make a long-term investment. A short-term option isn’t ideal.

2: Opt for the Right Stock.

Purchasing the right stock is much easier said than done. I mean, yes, if you research a little, it’ll show you whatever segment has performed well during the previous year. But what are the chances of it following the same this year as well?

When it comes to stock investment - there’s nothing you can be sure of at the beginning. So, it’s best to buckle up your belt and study every potential investment opportunity closely. The more you read, the easier it will be for you to choose the best stock.

3: Avoid Going for an Individual Stock.

Opting for an individual stock and investing all of your cash in it can certainly be rewarding. It will help you earn much more money than diversifying your project.

So, why am I asking you to avoid it?

When you’re putting all your money in an individual stock, you’re pouring all of your luck into it as well. So, if you win, you’ll get a massive amount of money. 

But if you lose, you’ll go bankrupt.

Due to this reason, diversification is important, even if you are investing in Cryptocurrency. It increases your chance of getting more money while lowering the risk of volatility.

4: Be Prepared for Anything.

Even if you have chosen the right stock and nailed the investment procedure, don’t expect to win big money from the get-go. Instead, be prepared to lose a little bit of money. 

Even diversifying your money can lead to a downturn sometimes. However, there’s no need to be worried about it. You can easily recover it as long as you are investing strategically.

In addition to this, no matter where you are investing, ensure that you are doing it through the right platform. For example, if you are delving into the oil market, always opt for an app that’ll offer an elaborate idea of the investment proceeding. If you are interested to know more about it, read more here.

5: Keep Track of the Financial World.

The financial world is changing pretty eminently almost every day. And if you want to make a career in this aspect, you’ll have to keep an eye on everything that’s happening. 

The better your knowledge is, the more efficiently you’ll be able to invest.

Usually, following a finance-based website will be enough in this aspect. But, if you want to dive deeper into the market, make sure to follow papers, newsletters, etc., too.

The Bottom Line

When it comes to investing in the current market, it’s best to be as careful as possible. Or else you and your investment might fall apart midway. 

No matter what it is you need to do, there’s an app for it. This rule applies to everything from dating to business, and the investment sector is no exception.
Investing apps have become increasingly popular over the past couple of years. Their appeal is easy to understand, in that they’re consumer friendly and have opened the markets up to ordinary people. We look at the factors behind their emergence and whether or not they’re here to stay.

An app for everyone

In our modern world, those looking for the best investment apps will find themselves spoilt for choice. There are so many out there that entire web pages exist to help consumers sort the wheat from the chaff. These review sites rank and rate options based on various factors, including platform fees and commission amounts.
There’s an option for everyone, and it’s a good job because according to the Financial Times, retail investors accounted for one-third of stock market trading in 2021. Those taking advantage of investment apps made up a sizeable portion.
The growth in retail trading undoubtedly goes hand in hand with the rise in investment apps. It, in turn, is explained by the pandemic. With more people at home in 2020, and most of them having additional time on their hands, many explored new pastimes. Investing, and the chance to create a secondary income stream appealed to many.
This new breed of inexperienced investors naturally required certain things from the platforms they used – first and foremost, easily accessible advice and the ability to learn on the go. Many also had less capital behind them than traditional traders, meaning they wanted to be able to trade at low volumes and with minimal fees involved.
Enter mobile apps, which did away with the need for brokers, banks, and the high costs that have traditionally come with the two.

A burgeoning market

If there’s one thing we can take away, it’s that the burgeoning popularity of retail investing apps is down to a perfect storm of factors. This has seen app usage increase from 35.6 million in 2017 to more than 150 million in 2021.

So, what have user-friendly apps and lower trading costs meant for the retail investor? Access to global markets for the first time. With the cost and complexity of traditional investing removed, it’s easier than ever for traders to invest in stocks and assets without the need for a middleman. This means even lower-income individuals can profit from trading in a way that simply wasn’t possible before.

According to Deloitte, this new breed of trader has a notably smaller bank account than previously – but that doesn’t stop them from being active on the markets. They’re also less reliant on professionals for financial advice.

While some remain uncertain of the long-term effects of this shift, our personal opinion is this: anything that improves access to the markets for the ordinary man or woman and puts us all on an equal footing can only be a force for good.

With typical investments, you will make a profit if they rise in value and lose money if their value falls. By contrast, if you choose to place spread bets, you are not buying anything, just betting on whether the value of that asset will go up or down.

The first step if you want to engage in spread betting is to set up an online account, ideally a demo account to practice, with a regulated broker. Then you could start researching markets and create your trading plan.

What are the major advantages of spread betting?

This type of trading is one that some people opt for because it has some interesting advantages. These are some of the main benefits that can accrue from placing spread bets.

 · The leverage is advantageous

 Trading on the financial markets conjures up images of ultra-rich people in high-end London offices buying and selling the stock for vast sums of money. That makes it seem out of reach for most people, but that is not the case with spread betting.

 The leverage involved in it means that the person placing the bet only has to put down a fraction of the value of what they are betting on to open a position. The money that you put down is referred to as the margin.

An example of how it works would be if you are betting on shares worth £1000 with a 20% margin. In that situation, a spread bet of £200 would need to be placed.

 That makes it an appealing way of trading for people who want to make their capital stretch. Bear in mind that both profits and losses are worked out according to the full position (£1000) rather than the margin (£200) though.

 · The tax situation is appealing

 More traditional forms of financial investment within certain sectors, for example buying shares in the stock of a company, will leave you liable for capital gains taxation on any profits that you make. By contrast, spread betting profits are exempt from this tax in the UK and Ireland, helping you to maximise your return from these bets. Note that tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

· Wide market access

 Spread betting is a unique way of trading in terms of the sheer number of markets that it lets you bet on. From commodities and indices to the foreign exchange (forex) market and stocks and shares, many brokers offer more than 10,000 different financial instruments to choose from.

 As a newbie trader, you have the option to stick with what you know or place your bets across a wide variety of options for diversification.

 · Profit potential

 Most forms of trading will only see you make money if the asset that you have bought or invested in rises in value. If its value decreases, you will lose money on your investment.

 Spread bets differ from this in that you are not investing in or buying the actual market asset. Instead, you are wagering on whether its value will rise or fall.

 Bets on the value rising are known as taking a long position, while ones, where you are betting on a drop in the valuation, are called taking a short position. What it means in practice is that you have two potential ways to profit from your trade rather than just one.

 What should newcomers bear in mind?

Perhaps the single most important thing for people new to spread betting to remember is that it is still possible to lose heavily. Furthermore, any loss will be worked out based on the full position, which is always higher than the margin that you bet.

It can be boiled down to this: should the market that you bet on rising 20 points in value, you will profit by 20 times what you bet. On the other hand, if you take a long position and the market drops 20 points in value, you will lose 20 times what you bet on it.

 There are plenty of plus points to spread bets that make them well worth exploring but it is best to practice with a demo account if you are new to the game. 

Spread betting is something that could be profitable and rewarding if you are careful to complete your due diligence and make efforts to minimise risk.

*Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when spread betting and/or trading CFDs. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

*Marketing for CFDs and spread betting is not intended for US citizens as prohibited under US regulation.

Potential for growth

Cryptocurrencies have dominated the growth conversation in recent years, with their promise of rapid and high increases. For example, Bitcoin and Ethereum have grown astronomically in recent years. While five years ago a single Bitcoin could be purchased for around US$500, by the end of March 2022, one Bitcoin cost over US$45,000, representing growth of about 9,000%. Likewise, Ethereum saw its price increase by more than 500% when it peaked earlier this year.

However, cryptocurrencies can also be very volatile, as evidenced by the recent dramatic price drops. As of 30th June 2022, Bitcoin’s value stood at $19,985 – a price decrease of over US$25,000 in the space of three months. What’s more, Ethereum’s value fell by 6% in just one day (30th June).

Stocks have the potential for rapid growth, just like crypto, but with far less risk. Following the outbreak of Covid-19 in March 2020, Zoom quickly became a household name. Communication suddenly went fully online and the demand for video calling skyrocketed. This demand remained high throughout 2020 with shares in Zoom peaking at around US$560. At the beginning of March 2020, they were around US$110 per share, compared to just US$36 per share the year before – a remarkable price increase.

But Zoom is not an outlier. The video conferencing tool is just one of many stocks to have seen price increases so high that they wouldn’t look out of place in the cryptocurrency market. 2022 has been a strong year for energy companies to date, oil and gas giants Exxon Mobil (39.96%) and Shell (20.48%) have both seen their share prices rise significantly in 2022. Elsewhere, drug manufacturers have performed well so far this year, with AstraZeneca, Eli Lilly and Merck all seeing their share prices increase by more than 13%. 

Cryptocurrency risks

While both crypto and stocks have a lot of potential for growth, there is a key difference – risk. With stocks, investors are better protected against downside risks, which makes them a comparatively safer investment. The same cannot be said for cryptocurrencies. In part, this is because crypto is still relatively new. As such, if confidence drops in the coin or a regulatory barrier is created, users are deterred and any investment could quickly go up in smoke. Furthermore, however high the value of one Bitcoin is, its inherent value is zero. Therefore, even if the price surges due to high demand and speculation of further price rises, there is no protection against loss. Crypto exists in a continual cycle whereby all these factors lead to rapid rises in price, but also rapid falls.

Crypto may not be like this forever – it is still in the early stages. As time goes on, investors are gaining a greater understanding of what factors influence the market and prices, and this will only continue as crypto gains more popularity and becomes more widely accepted. But, on the other side of the coin, the volatility – and therefore the potential gains – may also be significantly reduced. Ultimately, cryptocurrencies, for all their upside, come with considerable risks. Investing is inherently a risk-based exercise but even then, crypto is particularly risky. Consequently, a diversified range of stocks is a better route for the more risk-averse. There remains scope for significant growth, just in a less risky context.

Loss prevention tools

Recently, more and more brokers have started to offer risk management tools for those wishing to engage in high-risk trading. Although not yet widely available across the retail market, these management tools, such as AvaProtect, can offer further protection against potential risk. Not unlike an insurance policy, these tools generally require a small fee. Traders are then able to stay in the trade and ride out any short-term drops in value, and therefore benefit from a positive overall momentum of the position. What this means is that if the market moves in a different direction than what was originally expected, traders can recover their losses, only minus the cost of purchasing the protection – a significantly better option than losing their whole investment.

Another option to protect against significant loss is a ‘take profit’ order together with a ‘stop loss’ order. Both tools allow traders to set limits on profit and on loss, so they are not exposed to more risk than they are comfortable with. In the case of a take profit order, the trader can specify the exact price at which they would like their open position to be closed out. This enables them to make a profit without the risk of subsequently losing it. A stop loss order works in a similar way, with the trader being able to set the limit at which they would like to buy or sell a stock once it reaches a certain price. This ensures that they are not exposed to more risk of loss than they want.

Investing is inherently a risky practice but those traders who have taken the time to understand these risks and review the options available to them may find that investing in stocks is the best option for them. Stocks offer high growth and there are ways to protect against rapidly losing these gains. As more and more people begin using trading platforms to invest in stocks, brokers will embrace risk management tools to attract and retain new users, making investing in stocks even more appealing.

About the author: Dáire Ferguson is CEO at AvaTrade.

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