Today, the stock market is considered an investment solution to lots of individuals, as it is quite easy to start trading, by finding the right platform for you online. However, it is always better to learn to walk before running. Here is our guide on how to start trading stocks online, and better understanding what you are doing.
Why do Investors choose the Stock Market?
Firstly, you should understand why some investors do prefer the stock market to other investment methods, such as the property market or savings accounts. Investing in stocks can provide a much higher investment return than via other instruments, and they could do so much more quickly. However, the reverse is also very true: You can find yourself with significant losses, whilst trading stocks. And depending on the type of stock you are buying, it can happen very quickly. However, if many people turn to the stock market today, it is because they understand that through solid strategies, it can be one of the most efficient money investment tools available.
Online traders first have to find a platform on which they can deposit their money to buy stocks. This is a critical decision and it shouldn’t be taken lightly. Thankfully, you can find information about them on comparison websites.
What Financial Instruments can buy on the Stock Market?
This is perhaps the most complicated part of investing in the stock market: What should you buy? There are a vast amount of products available today, with traditional stocks, that it can take several days, only to learn about the financial instruments available. Here is a quick overview.
Buying equity shares entitles you to receive a percentage of the profits paid out by the company via dividends.
Bonds tend to be issued by the government, however, companies can as well. Through these you are considered to be loaning money at an agreed interest rate which is to be paid out to you, in return.
Investing in mutual funds means that you are putting your money in a basket, with several other investors, and the value of it is used to purchase various financial instruments.
Exchange traded funds and track indexes. In example, in London, it is the FTSE. It gets you a share of all shares that it includes, typically at a lower cost, but with the same return and risk.
Derivative products have become a big part of todays trading. They are always based on the performance of the underlying asset, which could be bonds, commodities, stocks, currencies, market indices or interest rates. Always bear in the mind the risk level before investing, and keep on top of the daily news.