You are able to buy shares in any company that is traded publicly on a stock exchange. There are a number of stock exchanges around the world, the largest of which are located in New York, Tokyo, Shanghai, London, Hong Kong, Frankfurt and Mumbai.
In order to buy shares you use an online broker, which charge a commission on each purchase. It is easier to buy shares now then it ever has been, it’s simply a matter of choosing which ones. In fact you can do it from pretty much anywhere with an internet connection. That includes lying on a tropical beach with your smart phone! If you are getting started out we recommend using a site called Etoro. You can begin with a practice account and not risk any money at first. It is a unique site for investors because it gives you the ability to deposit money and then choose a successful investor to copy, the site will automatically purchase shares in the same company as the person you are copying. Alternatively you can buy shares yourself and other people have the opportunity to copy you.
Money can be made by purchasing shares through one of two ways. First of all the price of the shares you buy can increase in value. This happens when a company makes more money and becomes more profitable. Even though historically the stock market is a very good investment with an overall average return of 7% per annum, there is no guarantee of future returns. The stock market and individual shares especially can incredibly volatile with regular cycles of boom and bust. If companies go bankrupt you can lose everything you had invested in that company so the idea is to diversify your portfolio to limit your risk and maximise reward. But on the other hand, many people have made fortunes in the stock market by backing the right company at the right time. If you had invested $1000 in Netflix in 2007 it would be worth over $50,000 in 2017.
The second way to make money from shares is through receiving dividend payments. This is where the company pays shareholders a percentage of it’s profits straight into your bank account. They are usually paid monthly, quarterly or annually. If you purchase shares in a solid company with regular dividend payments, it can be an excellent passive income.
To pick which company to buy shares in you can do technical analysis, fundamental analysis, listen to tipsters or invest in index funds. Index funds track groups of the largest companies on each stock exchange known as market indexes such as the FTSE 100 or NASDAQ. Either way you should always do your own research before making any purchase. Read the books from the reading list below before you start investing as they have some good methods to choose which companies to buy shares in.
Investing in shares can lead to untold riches, financial freedom or financial ruin depending on the approach you take. Most great investors recommend diversifying your portfolio so that you don’t have all your eggs in one basket. No matter how great you may think a company may be, there is no company in the world that is full proof which has been proven over the years by many companies share price taking huge drops over night or even going to zero. Either way investing in any form is better suited to someone with a high level of tolerance for risk who is willing to educate themselves as much as possible and never invest more than they are prepared to lose.
When you sign up for a trading account you can get extra cashback by registering through a site such as Cashback Cloud, this will give you a commission on all the purchases you carry out, similar to rakeback with poker or cashback on your shopping
Only invest money you are prepared to lose. You can make a lot of money trading stocks and shares but you can lose everything as well. The best thing to do when starting out to is to open a practice or play money account. This allows you to practice without risking any money at first. Etoro allows you to trade the stock market and also copy investors who consistently make profitable trades so that you can trade automatically.
Shares made simple – A great book for beginners starting off trading stocks and shares.
The Naked Trader – Full of strategies and techniques from a down to earth guy who’s made millions trading shares.
The Intelligent Investor – The stock market bible for the more advanced trader interested in value investing for the long term.
Sites to use
Etoro – A social network built around individuals who trade forex, stocks and other commodities. A great place to start because commissions are low.
Cashback Cloud – Sign up to a trading account through this site to get cashback.