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So, you want to invest in stocks? You may have wanted to for quite some time but were either scared or nervous about investing. Investing in the stock market can be very confusing. Television shows and magazines are always telling you the one stock that you absolutely must own now. Market pundits offer confusing opinions about whether it is the right time to buy or sell stocks now.
Here is some basic information on investing in stocks.
Many people think of a stock as a ticker symbol and a bunch of numbers that flash across a screen. However, a stock is a lot more than that. A stock is ownership in a company. Every share that you own represents some portion of an actual company. Owning a stock allows you to share in the actual earnings of the company. This doesn’t mean that you can walk into a store and demand a share of the company’s profits! You can however share in dividend distributions and make money off of price appreciation.
As a shareholder, you are entitled to certain rights such as the right to attend shareholder meetings. You have the right vote on all major company decisions. This includes changes in management, company policy, and the makeup of the board of directors. You can also vote on potential mergers and acquisitions. The more shares you own, the greater your voice within the company.
You can learn a lot about stocks by studying the habits of the world’s greatest investors. Investors like Warren Buffett, Peter Lynch, and Whitney Tilson have built their fortunes through stock ownership. They bought shares of quality companies trading at discounted prices and held them for the long term. Stock investing is not a get rich quick scheme. If you want to get rich overnight, then stock investing is not right for you. If you are willing to take a disciplined approach to investing then you can make yourself some money.
Remember that when you buy a stock you are buying ownership in a real company. So only buy shares of companies that you would actually like to own. Buy companies that have real earnings and not just a hope of profits in the future. Many investors have been burned by buying speculative companies with no actual earnings. These paper giants usually wind up leaving investors broke and disappointed.
Stocks that pay dividends are great since dividends are the only real form of income earned from investing. You don’t actually make money on the rise in a stock price until you sell your shares. You can miss out on a gain by holding shares too long. This is not true of dividend stocks. Quality dividend stocks pay investors a cash distribution every three months. These dividends can really add up as you accumulate more and more shares.
So, what’s your next step? There are a number of great sites on the web that can help new investors. Sites like Stockpickr, TheStreet.com, GuruFocus, Zach’s Stocks, and Streetinsider all offer geat advice for investors. Even the Motley Fool still has useful information. Scottrade, Sharebuilder, Buyandhold.com, and E*trade are good brokerage firms for investors with $500 or less looking to get started investing.