Investing In The Stock Market? What You Should Know

Investing In The Stock Market? What You Should Know

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Have you ever considered owning a percentage of a company? If you answered in the affirmative, you may enjoy investing in the stock market. Before you put any of your money into the stock market, there are a number of things you should know. You will find the pertinent information in this article.

Stocks are more than just pieces of paper made for buying and selling. Once you own a stock, you now have partial ownership of whatever company is behind that investment. This means you are entitled to both claims and earnings. In several cases, you can vote in major corporate leadership elections.

Stocks aren't just a piece of paper! If you own a stock, you actually own a small part of the company, and you should take that investment seriously. This means you are entitled to both claims and earnings. You can often get a vote in elections regarding board members.

Go ahead and vote, take advantage of it if you do own some common stocks. Depending on the company charter, you might get voting ability when it comes down to electing board members or directors. The voting typically happens at the annual shareholders' meeting, but you can also vote by mail.

A good rule of thumb is to invest a maximum of 10% of your total earnings. This will greatly reduce the likelihood of your equity being totally wiped out in the case of a rapid stock decline.

A good goal for your stocks to achieve is a minimum of a 10 percent return on an annual basis, because any lower, you might as well just invest in an index fund for the same results. In order to calculate your possible return from a stock, you want to add together the dividend yield and the projected growth rate. For a yield of 2 percent and with 12 percent earnings growth, you are likely to have a 14 percent return.

When searching for stocks then look into those that get you a greater return than 10%, which is the market average, because you can actually get that type of return from index funds. If you'd like to estimate your return from a stock, find the earnings growth rate that's projected and add that to the dividend yield. So for example, with a stock that has a 12% earnings growth and that yields 2% could give you 14% return in the process.

For beginners, it is best to adopt a simple and straightforward investment strategy. You may be tempted to become diversified overnight by trying every investing strategy you're aware of, but it's better to use the one thing that you know works, especially if you're a novice. You will end up saving a lot of money as time goes by.

Don't put all your faith in penny stocks if you're hoping to hit it big in the market. Although they pose a much lower risk, penny stocks will not give you the growth and interest rates of blue-chip stocks, so this is something to think about. While choosing companies with growth potential is important, you must always keep a balance to your portfolio with many large companies as well. These large companies are very reliable in their growth. Therefore, their stock is probably going to do very well on a consistent basis.

Don't over allocate your wealth in your own company's stock. Supporting your company is one thing, but risking you entire financial future by being over-weighted in one stock is another. If your main investment is in your own company, then you might face hardship if your company goes under.

As you have seen, for every person who succeeds in the stock market, there is someone else who loses their shirt. Neither of these situations are uncommon. Though luck is surely involved, it is also possible to improve your fortunes by gaining knowledge about the best way to invest your money. Use the insights you've gained here to help you increase your success in the stock market by practicing smart investing.

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