Introduction
To understand stock investment for beginners, let us break down the terms and study them separately. Stock is a division of ownership of a company or a corporation. The term stock is also understood as shares in American English. Stocks are not always equal and they can be bought and sold privately or either on stock exchanges.
Stock exchanges and transactions are closely and carefully regulated by the government in order to avoid frauds, to protect the investors and to benefit the larger economy. Stock certificate is a legal document that documents the ownership of shares. This certificate includes all important and necessary details like the number of shares owned by the shareholder, the par value and the class of shares, etc.
Types Of Stocks Investment
There are different types of stocks investments you can find. These need to be kept in mind by any investor, whether they are beginners or not if you are interested in stock investment. They are:
1. Preferred Stocks
Every year investors are given a fixed amount of dividend and the price of preferred stocks is not volatile. Stockholders do not have the voting rights.
2. Common Stocks
It is just the opposite of preferred stocks. Here, the investors are given priority when the company has surplus money to distribute. Voting rights are acquired by the stockholders in common stocks.
3. Hybrid Stocks
Hybrid stock is one where some companies offer preferred shares with the option of converting them to common shares with certain conditions. These type of stocks may or may not have voting rights.
4. Growth Stocks
As the name implies, stocks here do not pay high dividends because the company prefers to reinvest the earnings in order for it to grow on a faster pace.
5. Income Stocks
Stocks are on higher dividends and with higher dividends come higher income.
6. Large Cap Stocks
This type of stocks are established enterprises that has huge amount of cash, however, they do not grow rapidly. Investors can acquire higher dividends.
7. Mid Cap Stocks
These are medium sized companies which have the potential to grow and also has a name in the market.
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8. Small Cap Stocks
This type of stock has the smallest value in the market and they are actually new in the market.
Read about 7 Best Investment To Make In The Stock Market For Long Term.
Best Stocks You Can Invest In
Investment is the process of investing money into something to gain profit. People invest their money into some company, projects or corporation with a view to generate greater profit in the near future. #BestStockInvestment A person who allocates capital with the expectation of financial gain is called an investor. Following are the 6 major types of stock investments:
1. Mutual Funds
Here the investors buy a huge number of investments in a single transaction. These funds acquire money from various other many investors after which a professional manager employed will invest that money in bonds, stocks or other profitable assets.
2. Stocks
It is primarily an investment in a particular company. Buying a stock means purchasing a small piece of that company’s earnings or assets. Stock is of higher risk than other investment but it is highly profitable for anyone even if investors may be beginners. Basically the stock investors accumulate wealth when the value of the stocks owned by them shoots high and they are able to sell them for a good sum.
3. Index Funds
It is a type of mutual fund that tracks an index instead of paying a manager to choose investment type. Since there is no manager on the payroll, index funds cost less and hence the benefit.
4. Bonds
In simple terms, bond is a loan you deal with a company or the government. After you buy a bond, the bond issuer will borrow your money and they pay back your money with the interest. Bonds are risk free but they do not earn much profit.
5. Exchange- Traded Funds
It is similar to index funds wherein they track a benchmark index in an attempt to mirror the index’s performance. ETFs are also cheap as there are not any active managers to manage.
6. Options
A contract to buy or sell a stock at a set price and by a set date is what is known as options. As the name suggest, there is no hard and fast rule that you need to buy or sell the stock.
Safe Stock Investment For Beginners
First timers or beginners might be a little skeptical about stock investment and they may fear the risk that may arrive with it. But one may play it safe and try their hands on it if they interested and willing. The core agenda of stock investment is obviously to yield greater returns. Things may be a little rough and haywire for the beginners but you will get the hang of it only when you get your hands on it. There are multiple numbers of stocks available today but the following stocks will be great for the beginners as these are the top picks:
1. Amazon
Who does not know about Amazon? Well, all of us do know. Amazon Inc. is the largest e-commerce company in the world today. Not only is Amazon the industry leader in the e-commerce section but it also has an exceptional share in other growing trends like streaming videos. Amazon has been on the spotlight for more than two decades now and the company has made massive profits. It only has benefit but also it plays a significant role in the international market. So, if you are beginner and you are searching for a stock, then Amazon can be your idea choice in the long run.
2. Facebook
It is the world’s largest and most popular social media company since its inception till date. The number of digital advertisement viewers is massive as the number of active users of Facebook amounts to 2.7 billion[s]. WhatsApp and Instagram, the other two famous social media site after Facebook is also owned by Facebook. So, one can imagine the profits and benefits of Facebook. Just like in every media house or production house, advertisements are the highest revenue generation factor. It is the same with Facebook as well. The company is also hopeful of bringing shopping features in WhatsApp to expand their income source.
3. Netflix
Netflix is the answer if you are thinking of stock investment in the streaming arena. With the advent of modernization and digitalization, the demand for home entertainment is growing each day. Among all the other OTT platforms, Netflix seem to stand out and it has become the people’s favorite due to its advanced resource advantages.
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