How to Invest Stocks – Mapping Out the Basics

To get the lowdown on how to invest stocks you need to know what stocks are, what value they represent for you, how you stand to earn from your investment and how you can lose it.

To learn how to invest stocks, you need to know that the entire volume of stocks issued by a company represents the total capitalization of that company plus its earning potential within a year. For instance, the value of the total stocks of a company with a basic capitalization of $2,000,000 USD and making a profit of $1,000,000 USD annually is $3,000,000 USD. If this company were to issue ten thousand shares of stock, each one of those shares would be worth $300 USD.

Knowing how to invest stocks should make you aware that people buy stocks because they intend to earn from them. This is done in either or both or two ways. Certain types of stocks are called income stocks because the company which sells them issues cash or stock dividends annually to their stockholders. People can convert stock dividends into cash by selling them.
Other stocks are called growth shares because the profits of the company are not distributed to the stockholders but returned into the business for the purpose of making it grow. The owner of this kind of stock makes money by selling his shares at a moment when their value becomes considerably higher than the original price he bought them for. In this way, he makes a decent profit.

Knowing how to invest stocks reveals that It is possible to make more money faster with growth stocks if you know how to interpret market conditions to reasonably predict if the stocks you intend to buy are headed for a rise in value. If you buy those stocks before that value increase, you will make profit by selling them when that time comes. On the opposite end, it is also entirely possible register losses on your investment with growth stocks as when you fail to dispose of your stocks before they make a dramatic dip in value.

Of course, it is not always recommendable to sell your stocks just because they have devalued them a bit. Deciding what to do in those cases will depend on many factors. Some of those factors will have to do with current events that may affect the manner of thinking of buyers and consequently have an impact on the value of the shares themselves. Sometimes a loss in value is merely a prelude to a dramatic rise as will be obvious when you study graphs from the stock market. Knowing how to invest stocks will teach you how to interpret those graphs

To know how to invest stocks successfully, you should start reading about the stock market and studying the language of the discipline. You will find helpful tools in the websites of the more famous stock exchanges and indices. In fact that is the first thing that any newcomer in the business should do. You can start with make believe transactions. Of course you should be consulting with a stock broker for the real thing.

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