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The Basics of Stock Market Investment

stocks, dividends, portfolio, profit, investment, penny stocks.

Writing an article about stocks is not exactly a piece of cake. This is because stocks and bonds can be quite mystifying to the average Joe or Jane. However, the aim of this article is to de-mystify the pros and cons of stock investment.

First, what are stocks?
In very simple terms, we can say that stocks are units of ownership in a Public Liability Company. This means that the company question has sold its shares to the general public. So, if you want to invest your money in the company, you buy shares and you become a shareholder of the company.

How do stocks make you Money?
You can make money from capital appreciation. This means that the price of the stocks you bought have increased. So, you can sell your stocks for a much higher amount that you paid for them. You can also make money from dividends and bonus shares. Note that you can also use your stocks as collateral for loans.

How do you trade Stocks?
You cannot buy stocks the same way you buy groceries at the corner shop. You need to register with a stockbroker to buy and sell stocks. The stockbroker is a sort of middleman between the buyer and the seller. He gets a small commission called a brokerage for each transaction.

As an investor, trading stocks can be fun and convenient too. You can begin by buying penny stocks – stocks which are not very expensive i.e. between $1 to $8 dollars. You can also register with a stockbroker online and buy online stocks.

How do you build a Portfolio?
First, a stock portfolio means having stocks in a number of different industries – food, drugs, cosmetics, banking, insurance, oil and gas. You can build a portfolio by buying stocks in small quantities from different public companies. The aim here is to spread your risk. If the price falls in some companies, it may rise in others. Having a portfolio ensures that you don’t put all your eggs in one basket.

Is it Risky Investing in Stocks?
Well, yes! Every investment has an element of risk. The stock price may fall or the company you invested in may go under. But I still insist that the investment is well worth the risk. You may lose some money but again, you may double or even triple your money.

Final word:
One of the richest men in America today is Warren Buffet. What does he do for a living? He buys and sell stocks! Now, that tells you the whole story.

Start investing in stocks today and, who knows, you just might be the next Warren Buffet!
Published: 2008-10-13
Author: Emmanuel Osondu

About the author or the publisher
I am an African. An educated professional and a published author into the bargain. I have a background in education and writing. I am also a compulsive reader and I run a media outfit where I hold the twin portfolios of CEO and founder.

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