Investing in stocks is gaining widespread popularity every day.
Some people erroneously think of stock investment as a financial market trend.
In contrast, it is an important step to beginning your wealth-building journey.
Many people are beginning to pick on the importance of investing in stocks.
There is also an increase in the availability of investment platforms such as investingstrategy.co.uk that have created easily accessible options for anyone looking to begin investing in stocks.
Investing in stocks means buying a part of a public company.
The ownership of public companies is usually divided into small units called shares.
These small units are sold to the public as stock.
When you invest in stocks, you buy shares belonging to a company, and you automatically become one of the company’s owners.
How do people make money from investing in stocks?
When you purchase stocks, you own a slice of the company.
Every year, the company carries out its operations by selling products, providing services, etc.
At the end of the year, the profit realized by the company will be divided equally by the total number of shares to get the annual dividend.
The annual dividend will be added to the value of each share.
For instance, if you purchase 10,000 shares out of 10,000,000 shares belonging to a company at £0.10 per share, this means that you will pay £1,000 for these shares.
If at the end of the year, the company makes a profit of £200,000, that will be divided by the total number of shares, i.e., £200,000 will be divided by 10,000,000 shares to yield a profit of £0.02 per share.
If you then multiply £0.02 by 10,000, which is your total number of shares, you will have realized a profit of £200 on your shares.
This means that at the end of a year, the 10,000 shares you bought at £1,000 will now be worth £1,200.
This is a simple illustration to help you understand how you can make a profit from investing in stocks.
What you should know as a beginner in stock investing
Many people do not fancy investing in stocks because the returns are not immediate.
Investing in stocks is similar to planting a crop.
You cannot produce a maize crop today and expect it to yield fresh maize cobs tomorrow.
You have to give it time to grow. During that time, you must water the plant and provide all the necessary nutrients it needs to grow.
This is the simple truth about investing in stocks. The stock market is not perfect.
Different factors may affect the behaviour of your stocks. Still, you must be on hand to ensure that they do not drastically affect the growth of your stocks.
You can also take preventive measures like stock insurance to protect your stocks.
You must also grow your stock portfolio over time and diversify your investments.
This means that you do not put your money in only one company but in several companies that have the potential to grow.
If you are wondering how to get started with stock investing, do not look too far.
Many easy stock investment options and platforms are available to help you begin your journey.