Things To Know Before Investing In Stocks
Things To Know Before Investing In Stocks
If I mention the word stock investment to anyone irregardless of whether I know them or not, chances are 95 per cent of them will tell me that it is the riskiest investment, it is as good as gambling and how a couple of mistakes can drove anyone to bankruptcy and suicide. For there are bad news about stock investment on TV, papers and internet everyday and how it affected many people.
That is why I like to clarify a few things.
Firstly, investing in stocks can be fun and exciting especially to those who has been trading for some time and achieved substantial returns. But if you are new and have never traded before, it can confuse and even lead you to be conned by others who only care about themselves by making money out of others.
So what exactly are stocks and why do many people talk about them more as disadvantages than advantages? Welll, stocks are basically paper assets issued by companies out to the public in building their trust and raising their value. When you invest in stocks, you become the company's stockholder or partial company owner. When company makes money, you make money. Likewise when company loses money, you loses money. Or when company folds due to unforeseenable circumstances like Lehmann Brothers' foreclosure 2 years ago, you lose all your investments. That is precisely why many people talk about them as disadvantages as the media always spread news worldwide whenever a company closes down.
Therefore before investing in stocks, there are 4 basic questions you should ask as in:
Is the company registered?
Even so, how old is the company?
How stable is the company?
Do they have testimonies from clients to prove what they say is true?
It may sound funny and ridiculous but it is better to ask than invest blindly and feeling sorry when things are not going well for the company. Remember, you are investing your hard-earned savings into the company. Unless you have other diversifications as your back-up plans which have been proven in making you money, you need to know as much as you can about the company even if your questions sound awkward.
It is wise not to put all your eggs in one basket. But it is wiser to know the quality of that basket before putting in your eggs.
Let me ask you a question. Do you want to be an investor that stands out from the rest by being able to profit in good or bad times? Or do you want to be like everyone else who profits when company makes money but loses and not knowing what to do when company loses money? You decide.
If you want to invest in stocks, do not just be a smart investor. But be a wise investor who have researched, asked questions and done all the necessary homework before even investing. And best of all when things go wrong in the worst scenario, you have all the countermeasures in place to cut losses and still be making money in the long run.
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