When it comes to investing, the stock market is probably one of the first go to area for majority of individuals. It is a great way to invest for the future and to beat inflation. When considering buying shares in a company you need to have a strategy in place.
The most common strategy is to think long term, to not sell your purchased shares for at least 5-10 years. But we are living in a very fast paced economy where a lot is happening around the world and many changes are taking place. So only go for major organisations when investing for the long term. Do your research and see if these organisations are providing goods or services that will be used for the foreseeable future. Also worth checking if they are giving dividends to its shareholders so you can receive passive income, which you can choose to reinvest.
Another strategy is to think short term, buy and sell shares every month, week or even daily. depending on how much time you want to invest in this venture. When investing for the short term you will be looking for smaller gains but quite often. The best way to avoid taking to much risk in this strategy is to keep on top of your purchased shares, so only purchase stock on the amount of organisations you can constantly keep track off. A few ideas on the sort of organisations to go for are; try to look for companies with new innovations and a healthy balance sheet, try to check how much profit they have made in the past year and what are they forecasting in the near future.
There are a couple of ways to get into the stock market. You either find a Stock brokerage firm and invest in companies you are fond of, or you can pay a small fee to the broker and they can invest your money in companies that are doing well, or have potential. However, the latter doesn’t give you the freedom of making your own decisions.
We will mostly be focusing on how to choose your own companies to invest in and how to begin purchasing your very own shares. As is the case for almost any investment ideas it is important to understand and keep up to date on the economy and specifically on how well the sector is doing you are investing in. For example, if you are investing in the technology industry you would want to know who are the best players in this sector, who is up and coming, what are the challenges facing this sector and even past history on how well it has performed.
Keeping up to date with what is going on in the economy is important, take corona-virus for instance, when it broke out the share price for the majority of the stock market fell dramatically. Now, if you were up to date with this news you could have foreseen the impact It would have in the stock market by keeping a close eye on countries that already have had a massive dip in their financial economy. In which case you can sell your shares that you hold and invest elsewhere or keep hold of your money until the economy starts to balance.
If you do not have the time or patience to keep up to date with the stock market then purchasing mutual funds might be right for you. Funds are professionally managed by organisations that pool shares from several companies into one fund. How much return you make from your investments will be determined on how well the companies do within the mutual fund.
You can still be paid dividends and sell funds as you please when the price of the fund rises. Funds can also be purchased using the same platforms as you would buy shares.
If you are budgeting to invest less than £20k a year then stocks and shares ISA will probably be the best for you, as you do not pay any tax on profits made within your ISA. You are only able to open one ISA account per year so chose wisely on which platform to use.
There are many Stock Brokers and online platforms where you can trade shares, some are more user friendly then others and a lot safer to deal in. You can view our stock broker list to meet your specific needs by clicking below.