Investing in the stock market 101
This is going to be one of my series of articles/blogs where I will go through Investing in the stock market, and mostly how to invest with the best possible strategies.
In this particular article I am going to write about the basics about stocks, index funds and long-term investing.
First let’s break down the obvious. A stock (easily said) is a security that represents the ownership of a fraction of a corporation. Now there are a vary of different stocks, like common stock, large cap stock, growth stock, domestic stock and so on.
Now, The First Rule You Should Go By If You Want To Invest In The Stock Market Is…
“Time in the market, always beats Timing the market” — Keith Banks
What this essentially means is that long term investing is better and more profitable than short term investing. It is said that over 95 percent of day traders (Short term investors) lose money in the end. This is merely because they try to time the market perfectly for a good ROI (return on investment). But since no one knows where the stock is going to go (at least regular people) then you are essentially gambling with your money and hoping for the stock price to go up.
It is far better to invest for the long run because you will probably get an essential ROI on your money, if you choose the right companies to invest in. Moreover, if you choose to invest in the long run, you will also be paid every time there is a dividend payment from the company, that is if you invest in companies like McDonalds, JP Morgan, Coca-Cola etc. Which pays a good dividend per stock.
now if you invest in stocks for the long run, then you should invest in those stocks that are stable, adaptable for good growth and pays a good dividend. what this means is that you should be looking for growth stocks like apple, berkshire, facebook (meta platforms) etc. or dividend stocks like mcdonalds, jp morgan, cola, pfizer and so on. (a dividend are regular payments of profits made to investors who own a company’s stock, dividends are basically payments a company makes to share profits with stockholders). moreover, when you invest, you should consider investing in multiple fields. this is mostly for security of your money, which means if per say the whole medical field goes red, then your other stocks in other fields should still be fine. basically, diversify where you invest.
An example of this would be 10% in tech stocks (Apple, Microsoft etc.) 10% in medical stocks (Pfizer, Johnson & Johnson.) 10% in Energy stocks, 10% in dividend stocks, 10% in environment stocks and so on. Again, this kind of diversifying would make your investments more secure. But either way you should be in it for the long run. Don’t be so concerned if your investment goes red for a few months, if you have picked a solid company which is going to be in the market for a while it will most likely bounce back up and give you a positive ROI.