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The general concept of investing is setting money apart to acquire something, hoping that the value of such a thing increases over time and can be sold for gains in the future. It seems like the easiest way to make money.
Unfortunately, it isn’t.
Investment comes in different forms and, with such, different risks. You can literally invest in anything as long as you have the money. However, if you don’t do your research well enough, you may end up losing that money.
Talking about Stocks investment, it is one of the most popular investments globally, but not everyone really understands how it works. More so, not many also know how to trade and use a value calculator.
If someone recently introduced you to stocks investment, you may be very anxious to start considering how much they’ve told you. However, you have to understand the basic concepts. Thus, one of the recommended books to read is: “Stock Market Investing for Beginners: Essentials to Start Investing Successfully.” This book teaches about the fundamentals of the stock market and different strategies to apply to become a knowledgeable investor.
No doubt, it is an extraordinary way to build wealth, but the risks are high depending on what investor you want to be.
So, how do you start?
The first part of becoming a stock investor is opening a brokerage account. On this account you can monitor your stocks, buy or sell, and identify market trends. Your choice of brokerage account plays a huge role in the success of your investment. You have to make sure you choose the best brokerage with low commission fees and a plethora of resources.
For beginners, Fidelity is a great broker you could go for because they request your investment goals and help you achieve them.
You can be a passive investor, active investor, or pre-investor when it comes stock investment. That means you choose whether you want to be actively or passively involved in the management of your stocks or not.
As you invest in stocks, you may also be interested in trading them. It is one of the active ways to make money since it involves buying and selling.
The process of Stock trading for beginners goes thus:
If you already have a broker, you may not have to go about finding one. However, you must choose a broker with decent trading fees to purchase a mutual fund and other related costs.
Also, the best brokers will teach beginners the fundamental and technical knowledge of stocks and how to make bids. Later, they allow you to start with safer stocks and apply whatever knowledge you’ve gained until you can trade to satisfaction.
Since you want to start trading instead of investing, you will have to open a trading account. The broker will connect you to buyers or sellers and then receive their commission.
Some brokers charge a commission every time you trade stock and often range between $2 to $10 per trade. Some brokers don’t charge but collect these fees in other ways in other situations. And depending on your trade consistency, the fees may accumulate and influence profitability.
Additionally, you must view stock details before you trade to make the right move.
As a beginner, your goal is trading without risking your money. It may seem almost impossible to achieve, but it doesn’t mean you shouldn’t try. For instance, you can use a Stock market simulator to invest money and track price movements virtually. From what you observe using virtual money, you can decide whether to use real money or not.
Another tool to use is the Stock Value Calculator.
Stocks are assigned intrinsic values to determine whether they can be purchased or not. However, it may be impossible to decide on this value without using a stock value calculator.
The stock value formula is the P/E ratio. It equals a company’s stock price over recently reported earnings per share (EPS).
Interestingly, not every investor may be satisfied with a particular P/E ratio. Everyone perceives P/E ratios differently, and the rationale behind that is mainly investment objectives.
With that being established, value investors stick to low P/E ratios while growth investors stick to high P/E ratios.
Every trader should know other important valuation metrics such as Price/Sales ratio and Price/Book ratio.
