How to make money on stocks: the first steps

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

One often hears phrases about the need for additional income, as well as something like "I want to make money." One of the most interesting ways to make money is trading in the securities market. The stock market allows you to earn additional income without leaving your main job (or without leaving your home). This is facilitated by the development of technology, the presence of the Internet and a sufficient number of investment and brokerage companies. The most understandable, popular and affordable instruments are stocks. Since making money on stocks is not so simple, you need to familiarize yourself with the basic concepts of the securities market. Books, courses and seminars of brokerage companies can help with this.

First of all, determine for yourself how much you are willing to allocate for investing in stocks. Keep in mind that you can either make money on stocks or lose money completely, so it’s worth starting with a small (comfortable for your budget) amount.

Next comes the search for a brokerage company, because, according to the laws of Russia, transactions on the stock exchange can only be done with the help of an intermediary -brokerage firm. It is not difficult to find a reliable brokerage company - there are ratings of the largest investment companies and brokers on financial portals. Keep in mind that the broker withholds a commission for each operation, so it is advisable to familiarize yourself with the tariffs of brokerage services. In addition, reliable and reputable brokerage companies conduct training courses, master classes and seminars where you can learn how to make money on stocks and other investment instruments.

The third step is the choice of an investment strategy, it completely depends on your preferences, availability of free time, willingness to take risks. There are two main strategies: active and passive. An active strategy of behavior in the stock market assumes that the investor is constantly revising the structure of the portfolio. That is, he often buys and sells shares, depending on the situation on the stock exchange. Supporters of the passive strategy are set up for the minimum number of transactions, their task is to find a cheap (undervalued by the market) stock and sell it at a high price in the future. How to make money on stocks? The main principle of trading on the stock exchange is "Buy cheaper, sell more". The main difference in the strategy of behavior in the stock market is the time interval between the "buy" and "sell" actions.

The fourth step is to determine which stocks will allow you to implement the chosen strategy. If you are an active investor, then pay attention to the "blue chips", since most transactions are made with them, they are the most liquid - you can buy or sell themat any time during the operation of the exchange. Second-tier stocks are suitable for passive investors, as undervalued securities are often found among them. Of course, these recommendations are of a general nature, for example, Sberbank shares, being a blue chip, rose in price (from 14 rubles to 110 per share), which allowed long-term investors to make excellent money. Within this period, there were also significant fluctuations in the quotes of this share, which allowed active investors to earn even more on Sberbank shares.

Another answer to the question of how to make money on stocks is to receive dividends. A share is not only an object of speculation on the stock exchange, but also an equity security that provides the right to receive part of the company's profits. Ordinary shares do not guarantee this right, the owners of ordinary shares receive dividends only if the management of the joint-stock company makes such a decision at the end of the financial year. Preferred shares are guaranteed to receive dividends, but holders of these shares cannot participate in the management of the company.