Stocks are an equity investment that represents part ownership in a corporation and entitles you to part of that corporation's earnings and assets. Common stock gives shareholders voting rights but no guarantee of dividend payments. Preferred stocks provides no voting rights but usually guarantees a dividend payment. In the past, shareholders received a paper stock certificate -- called a security -- verifying the number of shares they owned. Today, share ownership is usually recorded electronically, and the shares are held in street name by your brokerage firm. Investing in stocks can be tricky business. In fact, it's best to treat all of your investment pursuits as a business. Heck, that's what Benjamin Graham (Warren Buffett's stock market mentor) recommended. Before you buy your first stock, you should master the basics of stock investing. This won't make you a great investor overnight, but only when you understand the fundamentals of investing can you learn how to invest in stocks with confidence. So, you want to invest in stocks? The first rule is to invest in what you know, but it’s actually not that simple. It’s not enough to simply understand the underlying business…you have to understand what makes a good investment, well, a good investment. There exist different schools of thought here, and investing is part art and part science. You can predict and hypothesize as much as you desire, but no one really knows exactly what’s going to transpire. Some different styles of investing include: Swing Trader A swing trading position is held longer than a day trading position, but shorter than a buy and hold investment strategy that can be held for months or years. Typically, a tradable asset would be held for days at a time in order to profit from price changes or 'swings.’ Profits can be attained by either buying an asset or by short selling. Learn more about Swing Trading Value Investing A value investor believes that the market overreacts to both good and bad news. He/she would look for stocks that they believe the market has undervalued; thereby profiting by buying when the price is deflated. Learn more about Value Investing Growth Investing Growth investors invest in companies that show above-average growth. Growth investing focuses on capital appreciation. Growth investing kind of contrasts with value investing. Learn more about Growth Investing Great chess players don't sit at a board and just…play. Masters of the game have a very concrete plan of how they intend to play. They decision-making that can adapt to whatever their opponents throw at them. Investing is no different: you need a plan to guide your investment decisions! DECIDING WHAT TO INVEST IN You know you are ready and willing to invest. Now it’s time to decide in what. Make sure to: Research ETFs Find the exchange-traded fund which track the performance of the industry and check out their holdings. Choose Sectors Select your stocks based on specific criteria (sector, industry etc.) Use a screener to further sort companies by dividend yield, market cap and other super useful metrics. Stay Informed Keep up-to-date. Read stock analysis articles. Read financial news releases. Stay critical. Types of Investments BONDS Bonds, or fixed-income securities, are debt investments in which an investor loans money to an entity, with interest. The borrower borrows the funds for either a fixed or variable period of time. MUTUAL FUNDS Mutual funds are operated by money managers and should match the investor’s objective. They are made up of a bunch of funds collected from many investors and the purpose is to invest in securities like stocks, bonds, etc. SMALL-CAP STOCKS Small-cap investors are the risk takers. These small companies have huge potential for growth. However – because they are often under-recognized, more research is necessary. This requires the investor to have more time available to properly crunch numbers. LARGE-CAP STOCKS Large-cap investors are more conservative – these guys like to play it safe. With their steady dividend payouts, these big-cap blue chip companies are as stable as they come PENNY STOCKS Penny stocks are super high risk because of their lack of liquidity. Beginners are often lured in to these stocks because of their crazy low share price. This allows investors to hold thousands of shares for a relatively small amount of invested capital. With a scale like that, the gain of just a few cents per share can translate into major returns.
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