Stock Investing: How to Start 2022 A Step by Step Guide

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Stock Investing: How to Start 2022 A Step by Step Guide
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Warren Buffet, George Soros, Carl Icahn, and Benjamin Graham are famous billionaires
that every person aspires to be. Their net worth and their humongous fortune is always
the point of captivation for many people. You can find a lot of books and blogs filled with
admiration.
Now one wonders what contributed to their colossal wealth. How did the Richie-rich
become kings of the market?
If I were to quote that these Billionaires are intelligent investors, and stock trading is their
tool of generating an abundance of worth.
It will be hard to believe such an assumption to be valid. But it is reality; stock Investing
has enabled them to be billionaires.
You can ascertain through googling the potential of stock investing in wealth creation.
That’s why I am creating this guide, which will help anyone who wishes to jumpstart their
stock-market investing journey but do not have a clue to do precisely that. Therefore, read
this article thoroughly.
Stocks are investments representing fractional ownership of a corporation in proportion
to the total number of shares owned by a shareholder.
liquidation in corporate affairs.
Stocks are also known as shares and equity. The stocks are issued by the companies to
raise capital, and stock prices fluctuate based on the company’s performance.
The stocks can be bought and sold either privately or on a stock exchange.
Shareholders buy their stocks in the form of Initial public offerings (IPO), and they get a
dividend. It is a cash disbursement in favour of buying the company’s stock.
Type of stocks
Based on ownership
Common Stock – The holders of common stock have voting rights and can elect
the board of directors in a company. Common stock is a form of part company
ownership. After paying creditors, bondholders, and preferred stockholders,
common stockholders receive leftover assets.
Preferred stock – Preferred stockholders get no or limited voting rights in the
company. They have a higher claim on distributions such as dividends. They can
also claim higher on assets than common stockholders in case of liquidation.
Hybrid Stock – Hybrid stocks are those preferred stocks that can be converted
into common stocks at a certain point in time with some terms and conditions.
Hybris stocks are also known as Convertible Preferred shares.
Based on Market capitalization
Large Cap Stocks – Large-cap stocks are the shares of those companies that have
a market capitalization of more than $5 billion. These stocks usually belong to Blue-
chip companies.
Mid Cap Stocks – Mid-cap stocks are the shares of public companies that have a
market capitalization that can be between $1 Billion to $5 billion. These stocks are
similar to stocks of blue-chip companies in terms of growth and size.
Small-Cap Stocks – Small-cap stocks are the shares of companies that have a
market capitalization of $300 million to $2 billion. These stocks belong to small
businesses.
Based on Risk
Beta Stocks – Beta stocks can be negative or positive, which is determined by the
movement with the market or against the market. Derive Beta Stocks by calculating
the price volatility of the capital.
Blue Chip Stocks – Blue-chip stocks are the stocks that belong to companies that
have stable earnings, lower liabilities, and have regular dividend payout capabilities.
Defensive Stocks – The Stocks of Food and beverage companies are typical
examples of defensive stocks. Weak market and economic conditions do not perturb
these stocks.
Cyclical Stocks – Cyclical stocks are greatly affected by economic conditions and
see high price fluctuations. It means if there is a steep rise in financial terms, the
price of the stock will increase, and if there is a slowdown, the amount of the stock
will fall.
What is Stock Investing?
Stock trading or Stock investing is the process of frequent buying and selling of shares or
stocks to capitalize on the fluctuation in the daily price of commodities. One who trades
stock is known as Stock trader. These stock traders are market participants who buy and
sell stock on behalf of individuals or business companies.
Categorizing stock trading in two forms :
Active trading involves buying and selling shares within a day.
Day Trading, which is concerned with buying and selling stocks within a single
trading day.
Two methods can do stock trading:
Stock exchange
You need to visit the Local stock exchange, where you inform a broker you wish to sell or
buy a stock. The broker sends his clerk to a Trader who agrees on a particular price to
purchase and sell your owned stock.
Electronic Method
You need to make an account on an online brokerage platform to Sell and buy stocks that
you own of a company. For example, Sharekhan, Ameritrade, Groww, 5Paisa, and
Extrude, etc.
What is a Stock exchange?
The stock exchange is a corporate body where stockbrokers or stock traders can buy and
sell shares of stock, bonds, and other financial instruments. A stock exchange facilitates
investors to buy and sell shares of a company among each other in an organized and
legitimate manner.
Here I will lay out a Process that will enable you to learn How to start stock investing.
These are the necessary steps you need to take in the Process of stock trading. The steps
are as follow :
Get Educated Regarding Stock Trading
If you wish to start stock Investing, then you must gain a complete insight into the world
of stock trading. You need to be aware of all norms, terms and conditions, Metrics,
Analysis Techniques, and Risks involved with stock trading. You can also refer to books,
videos, and Blogs to learn stock trading.
For starters one can refer to these books listed below :
The Intelligent Investor and Security Analysis by Benjamin Graham
The Interpretation of Financial Statements by Benjamin Graham and Spencer B.
Meredith.
Expectations Investing, by Alfred Rappaport, Michael J. Mauboussin.
Common Stocks and Uncommon Profits (and other writings) by Philip Fisher.
“The Essays of Warren Buffett,” a collection of Buffett’s annual letters to
shareholders.
The Theory of Investment Value, by John Burr Williams
One Up on Wall Street and Beating the Street, both by Peter Lynch
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
and Reminiscences of a Stock Operator by William Lefevre
Set an Investment Goal
It is a crucial step after starting stock trading. You must make a budget regarding
expenditure on each stock. It will ensure you do not incur huge losses. You should do a
risk assessment should before moving ahead with the investment.
Research on Companies before Investing
Once you have a brokerage account, conduct company research to find out which stocks
are providing better returns. You can refer to the Wall Street Journal, CNBC, Market
Watch, Stock Chase, Investopedia, etc.
Conclusion
It is never too late to start investing in stocks, and also, there is no age limit. Anyone who
wishes to invest in stock can start anytime with any amount of money that they have.
Stock Trading has the potential to make you into a millionaire or billionaire within a
month or year. The only requirement that you need to start stock trading is full
knowledge.
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It can be both risky and rewarding, depending on the education that you have on the
subject matter.
In the end, I would like to mention that stock trading is an excellent passive income