Are you ready to take the plunge into investing, but don’t know where to start? Have no fear – this guide is designed for millennials just like you who are ready to gain a better understanding of the stock market and how it works. When it comes to your financial health and wellbeing in Australia, in the points below we’ll cover everything from the basics of stock trading all the way through to more advanced topics such as risk management and portfolio diversification. Let’s get started!
What are stocks?
Also known as “shares”, stocks represent a certain percentage of ownership in a corporation. Companies issue stocks in order to raise money for growth or expansion purposes, while investors buy these stocks with the intention of making a profit by selling them at a higher price than they paid initially. The stock market is where investors can buy and sell these shares.
Types of stocks
There are two main types of stocks that investors can purchase on the stock market – common and preferred. Common stocks represent an ownership stake in a company, whereas preferred stocks give their holders priority when it comes to dividend payments (dividends are portions of profits that companies distribute among shareholders). Common stocks usually carry more risk than preferred stocks, but also offer higher potential rewards.
How does trading work?
When an investor buys or sells shares on the stock market, they must go through a broker known as an intermediary. Brokers act on behalf of both buyers and sellers, matching up orders and executing trades for their clients.
Three common types of orders that brokers handle include market orders (buying/selling shares at whatever price is currently available), limit orders (buying/selling at specific predetermined prices) and stop-loss orders (ordering the sale of shares if their price drops below a certain level).
Let’s talk investment strategies
In order to make money in the stock market, you must have a clear investment strategy in place. This strategy should take into account factors such as risk tolerance, time horizon, financial goals and available capital.
For example, some investors may choose to focus on buying low-risk dividend-paying blue-chip stocks for steady income over the long term. Others, however, may prefer more aggressive strategies such as day trading or investing in penny stocks with higher risk/reward ratios – it all depends on your individual preferences and financial situation.
Investing in the stock market can be intimidating at first, but with enough education and practice you will soon gain confidence as an investor
To get started today, research some potential investments that fit your goals and financial situation, then contact a reliable broker who can help execute your trades on your behalf. With discipline and knowledge comes success – so don’t be afraid to jump into this interesting world. Good luck!
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