Can a mere mortal make a million dollars? 99.99% of people consider this question rhetorical, and only in a negative sense, but if you give one clear example at the very beginning: take a small starting capital of $ 1,000 and invest it for 40 years at 20% per annum (average stock market return) .
What we have at the output:
Your thousand in thirty-eight years will turn into one million dollars. And for this you do not need to have a large start-up capital or work tirelessly.
Now you understand that the rich people from Wall Street are not so fabulous people, everything is quite real and justified. A reasonable question arises – is it possible to earn faster or what to do to make a million in 38 years?
Using a small stock of analytics you can trade stocks. Moreover, it is known that not only the most common stocks can give maximum profit.
Beginner Equity Investments
Before you buy stocks, you need to understand why you are doing this. It is clear that your goal is to earn, but how much and for how long? And what will you do with the money? You will probably think “why is it important to know before you buy shares”?
The fact is that you can buy Coca-Cola shares and receive 10-15% of annual income, or buy shares in a biotechnological company for the development of pharmaceutical and cosmetic products and earn more than 1000% per year. Many people believe that investing in Microsoft or Google shares is reliable, but these companies are already worth billions of dollars, so what do they need to do to double the price?
Let's start with the obvious – dividends. This method, of course, is not the main one – the dividend yield is not very high, but as an example: the price of one share of Procter & Gamble Co is $ 66.20, and the dividend yield is + 3.17%, i.e. 2.1 dollars. Consequently, buying 15 shares for 1000 dollars, you can get your 31.5 dollars.
If the stock grew by 20% over the year, then plus 3.17% will be a great bonus, all the more you can reinvest this money and get even more profit in money terms next year. Using this type of earnings, you can have a stable income, which will increase every year.
Where to buy, to whom to sell? All operations with securities are regulated by law. Special structures keep records and control all transactions. The main participants in the sale:
- exchange – fully organizes bidding;
- broker – provides an opportunity for individuals to bid;
- depository – controls the accounting of property rights to securities.
To start buying and selling, it is enough to choose an intelligent broker (as a broker, open an account, deposit initial capital into the account and order the broker to buy shares (by phone or independently on the Internet).
A bank can act as a broker. Having opened an investment account, deposit money into an invest account, after that you can make purchases of stocks or other securities.
Which is better to buy? When is the best time to buy? To correctly assess the attractiveness of stocks, it is necessary to master two types of analysis: fundamental and technical analysis. In simple words: fundamental – assessment of an enterprise by its financial indicators; technical – assessment of the dynamics of stock quotes.
If it’s very simple, fundamental analysis answers us with the question “what is better to buy”, and the technical one “when is it better to buy”.
Now a brief educational program. The most liquid stocks are blue chips. The shares of such companies are reliable, the business is resistant to the ups and downs of the market. Such shares belong to the giants.
Securities of the “second and third” echelons are less liquid, but no less promising. There are fewer companies, but sometimes they can give odds, because in order for Google to grow 2 times, you will need to turn mountains, and retail chains – just open a few more markets. Therefore, in theory, it is better to have both in your portfolio.
Popular stock investment strategies
- Buy and hold. The bottom line is simple – buy stocks and hold until the rate goes up. The strategy is long-term, so you won’t earn quick money, but correctly assessing the potential of the chosen company, you can get good income.
- Accumulation. A little more complicated – you need to gradually accumulate an investment portfolio, buying a certain number of shares and reinvest dividends. For several years, a portfolio formed on the basis of dividend yield and savings will bring a tidy sum.
- Catch the wave. Estimated profits are higher, but the strategy is riskier. The bottom line is simple – we are waiting for the crisis, we are buying up inexpensively, and after the crisis we are selling expensively. This is a primitive description of the strategy, but understandable.
Of course, the principle of strategies is not described in a professional language – this is just information for thought, which can lead to a serious economic analysis of the financial market.
If you think that you are late for the golden growth in the shares of Apple, Google and others, then yes, but after 10 years you will again read articles in which they will talk about the crazy growth in the shares of companies of our time – you are not late, today and every day new companies appear on the market, among which there are hundreds of stocks – stocks that will grow one hundred times.