One of the easiest ways to grow your money is by investing in the stock market. However, this investment and saving idea is always easier said than done. A decent amount of your savings might grow into something bigger. But it can also be all gone in a blink of an eye if you don’t know what you are doing.
So for first timers invest in the stock market, it is advisable to do your extensive research first. To understand how it works, of course, a good start is to be familiar with the terminologies used in the market. Here some of the terms that you will probably encounter repeatedly as you venture into stocks investment.
Outstanding Shares – This refers to the total shares of a company held by all its investors.
Dividends – this is a term used to refer to the company’s profit that is paid to those people who invested in the company. Usually, the payment is reinvested to the company, so that it would grow bigger.
Earnings per Share – the earning of a company per share of stock. This is crucial in deciding the amount that you will be investing in the company.
Market Capitalization – the price of the current share multiplied by the outstanding shares. This will greatly help an investor monitor his or her investments in a company.
Price to Earning – simply the amount that the investors is willing to pay for every earning.
Now, that the terms are cleared, the next thing to do is to choose the company to invest in. It is best to invest in many companies instead of investing on a single one. There are two basic strategies in choosing where to invest: the growth stock and dividend stock of the company.
The growth stock’s basic principle is to buy the stocks when it is not worth that much yet, then selling it when its value becomes higher. But growth stock can also be unpredictable. An investor can lose all the money especially when the huge bulk of investment is in a risky company.
But there is also another strategy that can be used in investing, the Dividend Stocks. This strategy is much safer because companies are already starting to pay dividends. These types of companies are already stable and you can be sure that they would not close anytime soon. There is an assured increase of profit overtime but the best advantage is the stability and dividends. So basically, these types of company are paying you for investing. One basic advice an investor will give is to reinvest the dividends. With this, you can buy more shares. More shares mean bigger dividends, which basically translates to more money.
Remember that every company’s stock value is unpredictable, no matter how big the name is already. Like any business, a company will still have its ups and downs, which will also have a direct impact on your stock investments.