How to Make Money in Stocks: Beginners’ Guide to Investing in Shares
One of the most important skills you should learn is how to make money in stocks.
For obvious reasons, you will not see it listed in the list of ”Top 10 Highest Paying Skills.” But this will assist you in achieving a better financial future for yourself and your family.
This stock market investing for beginners guide will lead you through the complexities of the stock market and the business of equity investment.
You will learn how to easily make money investing in stocks even if you are a salaried employee, self-employed, a civil servant, or work in the organized private sector or informal industry (a techie, digital creator, freelancer, or coach), and regardless of your age group.
Also read, 5 Ways You Make Money In The Stock Market
What are Stocks?
Each company has a capital stock known as Authorized Share Capital. Visualize this capital stock as a large corporate pie.
Stocks represent ownership of a public company’s assets, earnings, and profits as a whole. Stocks are also known as securities or equities.
What is Authorized Share Capital?
Authorized shares, also known as authorized stock, are the legally permitted maximum number of shares that a company can issue to investors.
During the incorporation process, this number is stated in the company’s articles of incorporation or memorandum of association.
The number of authorized shares can also be found in the capital accounts section of a company’s balance sheet.
What is a Share of a Stock?
A share is a slice of the corporate pie. The capital stock is divided into many shares that can be purchased by investors.
Shares represent a right or degree of ownership in a company.
A company may have sliced its capital stock and issued millions of shares to the public.
If you buy a slice, you are a part owner or shareholder in the business with the rights to share in its profits, attend board meetings, and vote on key issues and appointments.
The ratio of the number of shares issued by the company to the number of shares you own determines your percentage of ownership (equity) in the company.
For example, if you buy 10,000 units of shares of a company with 1,000,000 shares in circulation, you own 1% of the company.
The more shares of a stock you buy, the more ownership you have in the company.
The shares that have been bought by investors are known as the “issued shares” or “number of outstanding shares.”
(Because the terms stocks, shares, securities, and equities are frequently used interchangeably, they will be used interchangeably throughout this guide.)
To start making money in stocks, you have to commit your capital to the stock market.
As in the lessons in the Parable of the Talents told by Jesus Christ in Matthew 25, you become the master (the venture capitalist), and the market becomes your servant, whose business is to make you money.
The following are the steps you can take to invest in stocks:
1. Determine Your Investment Objectives
Before you begin investing in stocks, you should have a firm grasp on your investment goals and objectives.
Are you putting money aside for retirement, a down payment on a house, or some other financial goal?
Knowing your specific goals will assist you in determining the best investments and strategies for you.
2. Open a Brokerage Account
To invest in stocks, you must first open a brokerage account with a stockbroker.
There are numerous online brokerage firms that provide a variety of services, including full-service brokers and self-service apps.
Five (5) steps for opening a brokerage account:
📌 Choose a brokerage firm
There are numerous brokerage firms to choose from, so do your research and pick one that matches your investment goals and objectives.
Important factors to consider when choosing a stockbroker include fees, investment options, and customer service.
📌 Gather the necessary documentation
To open an account brokerage firms will require you to provide certain documentation, in accordance with the “know-your-customer” (KYC) protocol.
This varies from one broker to another and may include proof of identity, proof of address, and financial information.
📌 Finish the application process
Once you’ve gathered all of the required documentation, you can begin the application process with your preferred brokerage firm.
This usually entails completing an online application and uploading the necessary documentation.
📌 Fund your account
Once your application has been approved and your account has been opened, you’ll need to fund it in order to start investing.
This is typically done using a variety of methods, which your broker will provide. It could be through a bank transfer, credit or debit card, or cryptocurrency.
📌 Familiarize yourself with the brokerage platform
Once your account is funded and you’re ready to buy your first stocks, spend some time getting familiar with the brokerage platform.
This includes learning how to execute trades, conduct investment research, and access your account statements as well as other information.
3. Research on Stocks to Buy
Once you have a brokerage account and some money to invest, you can begin researching stocks to see which ones you want to buy based on your financial goals and investment objectives.
Financial news websites, stock market data websites, and financial research firms are just a few of the tools and resources available to help you research stocks.
4. Buy Your First Stock
Once you’ve decided on which stocks to purchase, you can place an order through your brokerage account.
You can place various types of orders depending on your strategy.
Market orders and limit orders are the two types of orders associated with investing.
5. Monitor Your Investments
Keep track of your investments.
It is critical to review your investments on a regular basis to ensure that they continue to align with your investment goals and business case.
This will help you to make any necessary adjustments (rebalancing your portfolio) as needed.
This can be accomplished by tracking the performance of your stocks and staying current on the performance of the companies in which you are invested.
How Do You Make Money in the Stock Market?
The growth of your capital is appealing in stocks and shares investing. It’s what I call “Quintet Growth” because five income forces act on your capital in the stock market.
In other words, there are five distinct ways to profit in the stock market with a single investment capital.
1. Stock Price Appreciation
3. Bonus Issues
4. Stock Splits
5. Premium on Stock Options