Warren Buffett, the second wealthiest person in the United States, purchases his first stock at the tender age of 11 and from there, went ahead to make a killing in the stock market. And he’s just one of the many people who has made a killing investing in public company stocks, the likes of which include Tim Grittani, who became a millionaire at 24 by investing smartly in penny stocks and Chandresh Nigam who made it big selling IT stocks. So how does this work and how would you go about it?
The stock market, also known as the equity market is a place where companies which open their shares to the public sell the same in the form of exchanges or the over-the-counter market. This is important to the free-market economy, as it provides businesses with the capital they need to grow while letting investors get a slice of the company ownership, sharing in both the profits and losses.
In older times, stock trading was a slower and tedious process, with physical share certificates being the only proof of ownership of a share, but today electronic shares allow for fast trading with a phone call or email.
There’s no harm in the quick short selling of stocks if that’s your goal, as is the case in day trading of shares for a quick profit. Doing your research on quick growth trends of companies will help you take an informed decision.
As for long term investments, many beginners make the mistake of blindly looking for the cheapest stock options to buy and wait for them to hit low price points. Long term investments can also pay off when you put down money on a company you believe will grow in the long run based on the nature of the industry and their performance over time, as the stock itself will have high selling and low selling points, but a well-performing company will tend to show an upward trend in growth and stock value over a long period.
Don’t let your ego get in the way. If you go into losses and your objective projections for the company aren’t good, cut your losses, accept the failure and move on. There is a trend of people who tend to sell stocks that have made profits while holding onto the ones that are in losses, and go on to look for more options. It’s important to appraise your stock realistically, rather than putting it aside in the hope that it will rise as this behavior could land you in serious losses over time.
You also need to constantly keep yourself updated with the political and economic environment and its consequences on the industry you’ve invested in. Technology changes rapidly as well, and sometimes there’s not as much market data available as is the case with businesses using more traditional means. Many silicon valley startups have become billion-dollar industries in the own right overnight, and there is much to be made in profit from investing in new tech, just make sure you do your homework regarding similar kinds of business models and make projections based on that data.
Don’t put money on hearsay and hype. Many companies will make big promises which they aren’t likely to be able to live up to, and it is up to you to identify such situations.
It’s also a good idea to stick with stocks that have a lot of trading activity like the ones that are illiquid tend to show relatively fewer upward trends as a whole. All the best!