How to invest stocks online

April 26, 2019

Written by Finance Advisor

There are a lot of brokers online who offers the opportunity to buy stocks and make money.

Well, you have decided to invest online by buying stocks, you are not alone. Now, while you are reading this article, millions of people around the world are investing online, helped by several brokers or investment platforms online which make it easy and cheap.

For new investors, this is an easy way of making money.  But first, they have to learn and follow some steps to introduce themselves to the financial market. What is a stock? How does it work? What are the main types of assets?  When is the best moment? Let´s answer these questions and beyond.

A stock refers to the ownership certificates of any company. Shares describe the stock certificate of a particular company. So, anyone who holds a particular company’s share is described as a shareholder.

 

In order to make it easier to understand, here goes an example: in a business or company, multiple people can own a part of it. Hence, the equity of the company is divided into units.  These are the shares of stocks – also described as EPS by the name put on Wall Street.  When you buy or sell shares of a company through a stockbroker, you are telling the market you want to buy or sell shares of a particular company.

Making money through stocks

Once you´ve understood how the stock market works, it’s worth knowing how you can make money from your shares of stock.

Well, there are two main ways of making money on a stock.  In the first instance, the stock you bought appreciates in value. This means, the earnings of the company are increasing or, in other words, that people will pay more money for your shares than you paid for them before. When the market is open, the stock prices vary, so you could only know how much you’ve earned once you sell the shares.

The other option occurs when a company pays a portion of its profits to you as a shareholder in the form of dividends.

 

Types of assets: common stocks vs. preferred stocks

There are different and wide types of stocks. But the two main are the common Stocks and Preferred stocks. Let’s see the difference between each one.

A common stock is one which is referred to mostly when speaking of stocks. They represent a claim on profits (dividends) and confer voting rights. Investors most often get one vote per share-owned to elect board members who oversee the major decisions made by management.

Preferred stock on the other hand, is a share of ownership in a public company.  While both pay a dividend, preferred stocks pay an agreed-upon dividend at regular intervals. Common stocks may pay dividends depending on how profitable the company is. Preferred stock dividends are frequently above common stock dividends.

The ‘convertible preferred stock’  is a kind of preferred stock with an option of converting into a fixed number of common shares, usually any time after a predetermined date.

The stock market: how it works

This market involves a number of investors who buy and sell shares of stocks. Their opinion about the performance of the earning of a company is the stock prices. There are some traders who think the company will do well, while there others who think the opposite. While sellers are trying to earn much more money than what they paid for, buyers try to get the lowest price so that they can sell it for a profit later.

This is a simple way to understand how the stock market works.

What do I need to start investing in stocks?

The first thing you need to have in order to start investing in stocks is an investment account, which usually means a brokerage account.

An online brokerage account likely offers the fastest and least expensive way to acquiring stocks, funds and a range of other investments. With a broker, you can open an individual retirement account, also known as an IRA  or you can open a taxable brokerage account if you’re already saving adequately for retirement elsewhere.

Once you’ve set up and funded your brokerage account, it’s time to dive into the business of picking stocks. A good place to start is by researching companies you already know from your experiences as a consumer. And, last you have to decide how many shares to buy.

This market involves a number of investors who buy and sell shares of stocks

In conclusion, you will need a broker to make the trade, money to purchase the investment and an idea of what you want to buy. With this advice, buying stocks online will be very simple. Are you ready to start? Know more through these reviews.

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