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A Couple of Things to Think About Before Buying Shares

Stock-Markets / Investing 2021 Nov 25, 2021 - 08:40 PM GMT

By: Submissions


Buying shares is a form of investment that pays off in the long run. You can acquire shares at one price and sell them at a higher price. This is known as capital gains. From a historical standpoint, shares have provided some of the most resilient after-tax investment returns. You gain the money, pay income tax on it, and afterward deposit it into some kind of account, where it can earn interest. Alternatively, shares can provide income in the form of dividends. They’re usually paid out twice a year. Some companies pay dividends on an ad-hoc basis to demonstrate it has amassed sufficient cash reserves to make dividend payments.

Shares and stocks are terms used interchangeably to denote financial entities. You might be tempted to think that they’re the one and the same thing. Well, not quite. The difference lies in the fact that the word “share” is used to describe the ownership of a specific company, while the word “stock” is used when discussing ownership of companies in general. In some countries, there are very clear distinctions between the two, so exercise caution. At any rate, it’s recommended to hold shares of stocks of different companies belonging to different sectors. This can manage risk and reduce the volatility of the assets’ price movement.

There’s quite a bit you should know. If you don’t know enough about shares to invest, close the knowledge gap immediately.

Not All Shares Are Created Equal

As an investor, you can buy shares not only in your country of origin but also all over the world. At present, investing opportunities aren’t bound by geography. If an emerging economy or booming stock market has caught your attention, go right ahead. International investors are focusing on Sweden because it’s a leader in innovation with a stable economy. When browsing the stock market, you’ll discover a great many assets to invest in. If you’d like to find out more about Swedish securities, please visit Allocating a percentage of your portfolio to international markets is a move you should strongly consider.

Shares come with certain rights, such as voting, yet the level of corporate control depends highly on whether the share is ordinary or preferred. An ordinary shareholder gets to vote “Yes” or “No” to each resolution advanced by company directors at meetings. On the other hand, if you’re a preference shareholder, you have priority when it comes to the payment of dividends. You’re a partial owner of the company, but you don’t decide or influence management decisions. Even if the company were to go bankrupt, you’d still be paid before common equity shareholders.

In The Short-Run, The Price of a Share Can Fluctuate Greatly

Over the course of the day, the price of a share tends to fluctuate. Fluctuations in the stock market can be explained by human psychology. It’s a matter of supply and demand. If more people are willing to purchase a share than to sell it, the price automatically goes up. But if more people want to sell a share than to buy it, the price falls. To put it simply, prices fluctuate because some think that a company’s share is more or less valuable. You may be apprehensive of trying your hand at trading due to the volatility. The best thing you can do is to keep a close eye on the factors responsible for these fluctuations and trade with confidence.

You Can Invest in Shares Via a Financial Advisor or Broker

You can use a financial advisor for investment purposes. Given that the industry is undergoing rapid, technology-driven transformation, questions arise all the time. Besides buying and selling shares, you can get involved in funds, ETFs, and bonds. It’s a good idea to enlist the services of a financial advisor. They will take the time to understand your life and financial goals. Most importantly, they’ll help you develop a long-term plan. Investing should be done for the long term. You should buy shares when the price is low and sell them when the price is high. In other words, you should buy into a bear market.

Equally, you can invest directly through a broker or an online platform. The broker is a company that’s licensed to provide investors access to the stock exchange. When you’re a beginner, the right brokerage account can become more than just a platform for trading. The teacher takes on many roles. They’re your teacher, advisor, and investment analyst. No matter if you invest directly in shares or do it through a web-based platform, you pay a fee.  It’s charged to facilitate trading or to administer the account. It’s important to make sure that the fees can eat into your investments.

Good Advice Isn’t as Good as You Think It Is

Don’t rely exclusively on good advice. Following the advice of others can lead you down the wrong path while shutting out your inner wisdom. The point is that you should never ever buy shares in a company you know nothing about. It doesn’t matter who’s buying shares or recommending them. When looking to make an addition to your portfolio, understand how the company makes money and what the specific risks associated with it are. What’s the company’s position in the market? A strong market position usually comes with pricing power and the ability to maintain profits.

If you want to grow your wealth for the long term, it’s advisable to look into companies that do the same thing. Rather than focusing your attention on goods and services, you’d better think about the companies and organizations. The stock market features numerous publicly traded companies, so you’re spoilt for choice. Once you narrow down your options, activate your critical thinking and do some research.  No matter what, don’t make decisions based on what others have to say. Compare the company’s growth in sales not only from the last year but also from the last quarter. If the sales show an upward trend, that’s usually a good sign.

By Cynthia Madison

© 2021 Copyright Cynthia Madison - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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