You can invest in shares or stocks that can yield profitable returns in future. However, it is quite necessary to invest in a profitable share; you can ruin your financial condition if you don’t know how to invest in a profitable stock. Therefore, before you start trading, you should know the basic principles of stock trading and how a stock market works.
Why companies issue stock
Companies all over the world issue new stocks or shares in order to raise more capital than it can borrow. It also saves the company from making principal payments and periodic interest payments to the creditors. However, there are some disadvantages of issuing stocks. By issuing stocks, the company or the principal owners need to share their ownership with all the shareholders. Moreover, the shareholders have a voice in policymaking that affects the company operations.
By owning stocks, the shareholders own a part of the company. Therefore, as a shareholder, you are entitled to share the profits of that company. You can also make a profit by selling stocks when the price of a stock increases.
What a stock market is
Stock market is driven by demand and supply. The number of shares dictates the supply; the demand of a particular stock is set by the number of shares that investors want to buy. You should understand that whenever you buy a share, there is someone at the other end who sells it. You buy or sell shares through a stock market. Usually, the main players in the stock market are stock exchanges, which set the price of shares and also match the requirements of the sellers and buyers. There are 5 popular stock exchanges, namely, The New York Stock Exchange, The American Stock Exchange, The Philadelphia Exchange, The Nasdaq Stock Market and The Pacific Exchange.
Stock trading: Tips to become a good investor
As a beginner, you can follow these 2 tips to trade successfully.
• Gather information on stock trading: It is advisable that you read books on stock trading; it’ll help you to decide which stocks will prove to be profitable in future. You can also browse through financial sites in order to gather valuable information on stock trading.
• Learn stock trading from a mentor: Search for a knowledgeable person who can teach you the basics of stock trading and how a stock market works. A good mentor can answer all your queries and teach you when to buy and sell specific stocks.
As a beginner in stock trading, you should attend seminars, where you can meet a number of knowledgeable people from whom you can learn trading secrets. It will help you to become successful in stock trading.