A share of stock represents a share of ownership in a corporation. Stock is ownership in the most literal sense – you get a share of every profit the corporate or organization makes. The more shares you buy, the bigger your stake becomes.
How do Stock Markets Work?
If you want to buy a share of stock in any publicly traded company, you will need the services of a brokerage firm. You can buy and sell shares of stock on your own, but there are some practical and legal problems in it. It requires proper registering and licensing. A brokerage firm deals in stocks and other securities. It can act as your agent when you want to buy or sell stocks.
How can I Study Stocks?
You can go for fundamental analysis which is one of the most popular ways of studying stocks. You look for the basic information about a company like the growth of its sales and profits to have an idea of its stocks. Compare the current stock price to its face value and you can determine whether it is a good time to buy that stock.
Most of the individual investors use fundamental analysis to pick stocks for their portfolios. If you want to build a ‘buy-and-hold’ portfolio of stocks made up of company stocks that you can purchase and then own for years, you will probably use the methods of fundamental analysis. As an investor using fundamental analysis, you should focus on two separate approaches to picking stocks — growth or value or sometimes a combination of both.
What are Growth Stocks?
If you focus on growth, try to predict which companies will grow faster in the future, faster than the rest of the stocks in the market or faster than other stocks in the same industry. You can walk away with the profit as the price of the company’s stock increases. People who invest in growth stocks, go for it because their portfolio will be made up of top notch names. Companies like Coca-Cola, IBM and Microsoft have demonstrated great growth over the years and make for fine examples for portfolios.
What are Value Stocks?
Value investors buy stocks which are undervalued and then hold those stocks until the rest of the market realizes the real value of the company’s assets. They look exclusively for ‘bargains’ or stocks that are trading at a discount to their usual valuation.