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Besides the most traditional ways of making money, like working in the office 9 to 5 five days a week, you need to start thinking about what you should do about the money once you have earned it.
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Step-by-Step Guidance to Stock Trading Besides the most traditional ways of making money, like working in the office 9 to 5 five days a week, you need to start thinking about what you should do about the money once you have earned it. The most common conception of this is to simply save the money. Deposit it into your bank and let it rest or put it in high interest tax-free savings account for better APY. But, I have to point one thing out: your interest yield on traditional savings accounts will mostly by lower than inflation, which means, according to economics theory, your money will worth nothing in a perpetual time horizon. So, to prevent this eventually diminishing value of your money, you in fact need to invest your money. In this case, investing means making your money work for you so that you can fully realize the fruit of your work. There are many ways to invest your money, but I am only going to teach one of the most efficient way of them all, which is to invest by trading stocks. Everything starts with learning, so the same thing goes with trading stocks. You need to learn first! There are many free online trading courses which you can find easily through web search. But, I am going to introduce you to stock trading today, by showing you the basic concepts of stock trading and removing the barriers of beginners. Honestly, stock trading is not the right investing strategy for anyone. It is a risky endeavor that requires a strong mind and some hard work. I will show you now if stock trading is suitable for investors like you. Is Stock Trading the Investment for You? If you meet the following criteria, you should consider trading stocks: You have already filled up your 401(k) and you have started investing in an IRA. Usually you can only invest in mutual and index funds through a 401(k) but you can mostly buy stocks from an IRA. Taxes on capital gains in an IRA are deferred or eliminated completely. You have made maximum annual contributions to 401(k) and IRA. If you are likely to meet retirement goals, you can start stock trading taking on some more risks, if you are willing.
Investing in stocks not only exposes you to more risks, but it also requires more time and efforts than investing in mutual and index fund. You need to decide if you are willing to take on the risks before you start. Next step starts with educating yourself with the in-and-out of stock trading. Growing with Learning You should have already become familiar with everything with stock trading and stock market before your start. Remember that trading is highly risky, and a single mistake can be very costly. Start by learning the basics such as what stocks are, stock price, stock exchange, ticker symbols, etc. These are many resources like Free online trading courses you can find through web search to learn many aspects of how stock trading works. They offer great supply of knowledge and cost-savvy at the same time. Many online trading platforms offers trading simulation so that you can try trading stocks without risking real money. Also, you can take advantage of the free education and investment advisory offered by many stock brokers. No one should invest their money in stocks without some strategies, and you can gain these strategic resources from efficient research. Here, we have come to a part where I will guide you on how to gather information your targeted company’s stocks. Researching Stocks 101 I have myself researching and compiling a few key aspects you should look out when you are gathering information, AKA “researching”, about a company you wish to buy into. Now, let’s start. Reports are requirements of public traded companies. These reports are essential because they are crucial for investors’ acquisition of information into the company’s performance. Everyone can typically access these reports on the company’s website. But if you have trouble finding them, go search for them at the U.S. Securities and Exchange Commission’s (SEC) filing database EDGAR. Some of the most information-abundant reports include 10-K and 10-Q. 10-K is filed annually audited and 10-Q is filed quarterly unaudited. In them you will find financial data, risk factors, management discussions, etc.
Once you got the forms, you will be astonished with the vast amounts of data. But you can always save time by looking at the most important of them all. These include indicators such as Net income, P/E ratio and Return on equity. Become familiar with more financial indicators and you will be able to understands the reports better. Besides understanding the financial statements of a company, you have to know a lot more about the company to fully gain the all-rounded information of the company. These include where the revenue comes from, the industry the company is operating in, regulatory issues, future profitability, etc. Upper-level management is like the commander of the company. Research into the company’s leaders’ information including their names, roles, backgrounds, management style, etc. Make you agree with their ideology since they play a crucial role in determining your investments’ growth. Final Advice Learning these few lessons is not enough to become a successful trader. There are many stock market classes that can provide valuable knowledge which you can use in real-life trading. I strongly suggest Chelsea98 Financial Education’s trading courses. Their courses provide valuable lecture about different aspects of stock trading and provide training and exercises after class to further refine your trading skills. Read also: - How the stock market works
