Although investing in the stock market can be enjoyable and exciting, the main reason most people choose to invest is to profit. If you are serious about making returns from your investments in the stock market, then you will need to know how to select the right stocks.

The Stock Market

The stock market has certainly made lots of people rich, but it has also made many more poor. There are no magic answers to choosing the right stocks, otherwise everyone would be driving around in Bentley’s thanks to the stock market.

There are many different options that people have to invest their money. They can stick it in a bank account, or use bonds, stocks or mutual funds. Throughout the rest of this article, I will be concentrating only on investing in the stock market.

Before you can hope to invest in the stock market you will need to understand what they actually are. Stocks are literally a part of a company which can be sold. The company sells these stocks to raise investments for many different purposes. It is possible to buy stocks in any public limited company.

Doing Homework

Not all companies can sell their stock or shares. They first need to be a public limited company and be registered with the stock market. There are stock markets in all major countries worldwide and all registered companies will be issued with a ticker symbol. This makes it easy to track the price of the stocks.

Companies offer different types of stock, the most popular types include blue chip and penny stocks. Blue chip stocks are considered to be some of the safest investments as the investments are normally more secure.

If the company has made a profit at the end of the financial year then the board of directors will decide whether or not shareholders will be paid a dividend. These dividends can be very rewarding and can even be reinvested by purchasing new stocks in the same company. Dividends may appear small, but they are certainly worth considering in your investment plan.

Choosing Stocks Yourself

The easiest way to choose stocks would be to get someone else to do this for you. There are plenty of brokers that you can employ. If you want to purchase stocks yourself without requiring a broker then you can try several different routes.

A lot of the big companies selling stock have direct stock purchase plans. These allow you to buy stock directly in the company without needing to pay additional fees to a broker.

Once you have purchased at least one share in a company you could also join the DRIP program. This is a dividend reinvestment plan which means any dividends that you would due to be paid, will be used to buy up additional stock in the company.

When you are learning how to invest in stocks you might want to buy fairly small trades. You can find a number of special services which allow you to buy individual stocks. You can buy a single share in each company so you can build your confidence and experience.

A broker is still an option that many people will choose. If you want to go down this route, then you will need to understand you will need to pay fees and commissions on each trades. Brokers are ideal for people who do not feel confident dealing directly to buy the stocks. It is also beneficial to have a broker if you have a large portfolio of shares. That said, even with a broker, investing in the stock market is not without its risks.