Stock exchange is a term present in everyday life and that arouses a lot of curiosity in who wants to invest. The question you do not want to keep quiet about is: what is a stock exchange and how can it help your financial life? Discover in this article how to invest in the stock market and everything you need to know about this type of investment:
What is the stock exchange?
In general terms, the stock exchange is a kind of online market in which investors gather to trade stocks of publicly traded companies from a variety of sectors, such as retail, health, steel, etc., as well as other types of financial products. The stock exchange was created with the aim of being a way for companies to raise money to invest in their own. It works as follows: the company that makes its shares publicly sells the portion of its interest to individuals or companies in exchange for a certain financial amount. As a result, investors gain a stake in the companies they invested, with the right to receive part of the profits of these companies (or have to pay for their losses). Companies, on the other hand, get money for a cheaper value than they would get with a loan at the bank, for example.
Why invest in the stock market and what are the risks?
One of the main reasons for investing in the stock market is that it allows ordinary people the opportunity to invest in large and promising companies and, hopefully, share their financial gain by becoming a partner of the companies. Despite this, investing in the stock market also has its risks. One is asset devaluation, especially in times of crisis. The company you invested in is a poor performer, which leads to a drop in profits.
There is also a chance that the economic scenario will worsen and, as a result, the company will have a drop in sales, which reflects in the share price. Another risk is liquidity. It is possible that if you need to sell your assets you may not be able to in the short term if you have shares of companies that are not traded frequently in the stock exchange.
Another point that the investor should be aware of is the term to receive the money when selling the shares. In general, the payment in case of purchase or receipt of amount in sales happens in three business days. There are, however, exceptions where the process may be delayed.
Today, with the current interest rate above 14% a year, it is worth investing in fixed income. Mr. Kurtz has put together an investment guide with the best options for 2015.
How to invest in the stock market?
But, if you really want to invest in the stock market, the first step is to open an account at a brokerage or bank. It is necessary to have a bank account even if you have an account with a broker because the money will be transferred to this second account must come directly from a bank account with your CPF. Then set the amount you want to invest. Experts recommend that those who do not have debts reserve 15% of their salary for investments. However, it is best to start with little because there are risks in the stock market. After setting the amount, transfer the money from your account and you’re done. Just start investing. By the home broker you can even buy and sell stocks online. There are also brokerages that allow the purchase of funds and share of clubs through the internet. Inquire to choose the best option.
Still have some questions about how to invest in the stock exchange? Be sure to also read the article on what to do with extra money from the income tax refund