Yes. If you follow the guidelines below:
The first question fresh investors should ask is why am I choosing to put my money in stocks? The stock market comes with healthy risks and attractive rewards, both for short and long term players.
Investors are said to prefer the stock market because the offer the greatest returns in the short term. But stocks are also very volatile as they are driven by speculations regarding market activities, the value sometimes can fall below the price you purchased. Hence chasing stocks of companies with good reputation is often your best bet.
Before you make any decision about buying or selling shares or funds, find out as much as you can about the company or fund. Do your own research or get financial advice.
There are two ways of getting money from shares of a company:
- If the company grows and becomes more valuable, the share is worth more – so your investment is worth more too.
- Some shares pay you part of the company’s profits each year, called a dividend.
If you buy shares in larger, long-established companies you’ll probably get dividends, but you might not get rapid growth.
Shares that pay regular dividends are good for getting an income or the dividends can be reinvested to grow your capital.
Dividend income is taxed at a different rate from savings interest.
Smaller companies often don’t pay dividends. They might have more chance to grow rapidly, but can be more risky.
Given that the market is littered with risks and rewards, it is important to keep the word “balance” in mind when building your portfolio. Ensure you have a mix of highflyers (stocks with high growth rate), slow-and-steady (shares with high prices but steady yields) and a few gamblers (those that can either plummet or soar quickly). This allows you manage enjoy the gains of investing in stocks as well as absorb unusual shocks.
Most people invest to make money, and it’s no different for those who put their money in the stock market. The capital offers two key ways of making money: the first is by receiving dividends from a company whose shares you acquired. Dividends are small payments made to shareholders when by the investee company. It is done mostly when the company declares a profit for an operating year. Another way is to cash-in on your shares by selling them. You can turn in a profit when you sell at a higher price than you initially purchased them.
