Trading stocks are something that everyone has heard in the news or passing conversation, but a lot of people don’t know how to go about trading stock and maximizing profits.
Many businesses and holding companies require a minimum investment from each person. For example, a great new start-up may have a minimum investment requirement of $5,000 whereas a larger company looking for big investors may have a minimum of $20,000 or more. It is important to figure out how much you have to invest and how diverse you want your investments to be. It is not a wise decision to only invest in one sector or company because it opens you up to a higher chance of losses.
A financial planner is often the first go-to for those that want to begin a stock market portfolio. A financial planner is useful because they can help assess your overall financial picture and goals and develop a strategy to get you where you want to be and when you want to be there. This means taking into account your personal finances to see what you have to invest.
The financial planner’s job is to make your money work for you and provide a cash stream that helps you meet your most long-term financial goals. Deciding which stocks are right for you can be more complicated then you might think because there is so much to consider.
Younger people are sometimes advised to take more risk because they have more time to recover from any losses. Older people that are close to retirement may choose to have a more conservative portfolio of stocks. Part of the decision also relies on how comfortable each person is at risk regardless of their age or financial situation.
Unless you have a lot of knowledge and experience, you probably don’t want to attempt to invest on your own. Many stocks require a brokerage firm to handle the stock for you and make sure any rules and regulations are met and ensure your tax information is correct.
Keeping track of your holdings and investments online, however, is strongly recommended. If you see anything that is difficult to see or pick up on a trend, then you can act quickly to ask advice of your financial adviser. Being savvy in the financial world means staying up to date with what is going on, especially in your holdings.
Stock Market Trading
The vast majority of stocks are traded using what is known as an exchange. This means a buyer and seller meet and agree on a price for the stock in question. Many of us have turned on the news or flipped through the TV channels to see images of stock traders in busy physical locations known as a trading floor. Although this is common, there is also a lot of trade that happens via virtual exchanges.
The New York Stock Exchange
Perhaps one of the most well-known stock markets is the New York Stock Exchange. When newscasters are talking about the stock market being up and down points, they are almost always talking about the New York Stock Exchange. This is a popular market because there is so much stock being traded on a daily basis. This is referred to as volume.
When a market has high volume, it is easier for buyers and sellers to conduct business. You can almost always find a buyer or seller willing to do business. The question then becomes what price you can buy or sell at? There is no guarantee that you are going to get the value you want, but no one is going to make you sell either.
General Electric, Gillette, Coca-Cola, and Wal-Mart are all companies that trade on the New York Stock Exchange.
Microsoft, Cisco, Intel, Dell, and Oracle are all companies traded on the second most popular exchange known as The Nasdaq. This exchange is virtual with trades happening through a network of stock dealers and computers. The Nasdaq is popular with high-tech companies because of its over the counter and virtual trading aspects.
The Amex is a smaller stock exchange used mostly in the United States to trade small cap mutual funds and derivatives. Smaller investors may find that this is the stock exchange used to trade their stocks.
Foreign Stock Exchanges
There are quite a few foreign stock exchanges such as The London Stock Exchange or the Hong Kong Stock Exchange. Investing in foreign companies requires some experience so you should contact a financial planner if this is something you are considering.
The tax rules and other government regulations can make it difficult for some investors to do business outside of their native country. Those with dual citizenship may have an easier time doing this. There are other ways to go about investing overseas as well. One way is to invest simply in a company that does a lot of business all over the world but has a main branch in your native country. Sometimes even if a company is not doing so well here, they may have great success in another country.
Creating Your Perfect Portfolio
There are a lot of things to consider when it comes to trading stocks on the market exchanges. A lot of people simply rely on an investment professional to monitor investment accounts and make suggestions, but there is simply no replacement for being an informed and savvy investor. Even the best financial planner is going to have a lot more clients than you to manage.
Doing your part and keeping up to date on the latest financial news will get you thinking and make smarter investment decisions. When you take a more proactive approach, it means your adviser can do a better overall job for you. The old saying that two heads are better than one applies here. If you run across an investment that seems like it would be a good choice, then you can run it by your adviser and get a second opinion.