If you are a shareholder of stocks or are thinking of investing, it can be a great way to make money over time and save for your future, especially retirement. If you’re new to stocks, you might be confused by many of the terms and concepts you may encounter. Instead of waiting for the confusion to start, here are a few things you should know when you invest.
Dividends are payments made to shareholders in the form of more shares of stock instead of money or cash. Sometimes this can reduce the value per share, but overall it typically rewards shareholders without decreasing company profit. However, dividends are also not taxed unless the investor sells it, or it is paid out, often on a quarterly or annual basis.
Dividends can be especially confusing, and sometimes it’s hard to figure out the value of your shares. Luckily, you can easily find a dividend calculator to help with that.
These are likely the type of stocks you are most familiar with. They are viewed as a fraction of ownership of the company to which it belongs. The value of these stocks fluctuates, and higher demand also means a higher price. This is where people typically expect to make the most money. People often buy stocks at low prices and sell them when demand is particularly high to turn a profit.
Bull vs Bear Markets
The animals have little to do with the market but are simply the terms used to indicate the market trend. A bear market means that the prices of stocks are falling, and a bull market means that more people are buying stocks and are confident in the market. Bull markets are often a sign of economic growth, but the two will always follow each other in a cycle. No bull market is permanent, or vice-versa.
Diversifying is, in basic terms, investing in various things to expand and protect your portfolio. All corners of the stock market – capital gains, dividends, real estate, and everything in between – will go through a cycle of rising and falling.
In diversifying your portfolio, you protect your money by having different investments in different areas. Your shares could fall in a company while the worth of your real estate investment could skyrocket. Give yourself all the opportunities you can to make a profit!
This is a common term that usually means one of two things. The first is also called an investment advisor. It’s an individual whose job is to help you manage your stocks and money, including strategically investing on your behalf for a fee. These advisors have to go through intense training and must be licensed before they can perform their job. Still, do your research to make sure you choose the right person.
Stockbroker could also refer to a company that performs trades for you rather than an individual with specific advice. A brokerage company can do things like trade and sell stocks for you at your request.
Making investments of any kind is a tricky but worthwhile thing to do. There are many ways you can invest your money to try and earn more, including capital gains and dividends, among others. Knowing some of the basic terms, you might encounter on your journey into your finances can set you on the path to success.
The internet makes it easy to invest and diversify your portfolio nowadays, but it’s still important to know what you’re getting into. Knowing these terms will help you get started today!