Stock Trade Financial Freedom Basic Strategies
Nearly every investment portfolio includes stock for trade. Financial freedom planners recommend it as part of an asset mix that includes bonds, deposit instruments and real estate properties to boost wealth.
With the advances in trading technology, nowadays almost anyone can own and trade stocks online. If you want to engage in stock trade, financial freedom strategists remind that it is not a get rich quick scheme and takes time, patience and skill to produce profits. Stocks are great tools for creating wealth but they also come with risks which you can manage with the right education. The key to protecting yourself in this trade is to understand where you are putting your money.
What are stocks?
A share of stock or simply ‘stock’ represents ownership in a company which entitles you to a claim on a portion of the company’s assets and earnings. Your ownership stake in the company increases as you acquire more of its shares. Stocks are traditionally evidenced by certificates which, back in the day, were sold by endorsing and delivering certificates to buyers. These days, shares are traded electronically or scripless, without need for transferring paper certificates.
Income potential of shares
When a company is profitable, it may decide to release part of its earnings as dividends to the shareholders. Dividends can be in cash or shares of stock. The amount of dividends you may receive also depends on the number of shares that you hold. Additionally, the market value of shares may appreciate with its good performance, allowing you to earn profits by selling them at a price higher than their acquisition value.
How shares are bought
Publicly traded shares may be bought at the initial public offering (IPO) which is issued directly by the company or at the local stock exchange (secondary market). The goal of buyers at IPO is to sell shares at higher prices in the stock exchange or to hold them expecting their values to appreciate.
Like any other investment, there are no guarantees in stock trade. Financial freedom strategies must always include risk management to reduce your chances of losses. Companies may not always give out dividends and market values fluctuate with certain events beyond your control. Any investment such as stocks with high income potential presents great risk, although stocks have historically been proven to produce higher returns in the long term if you choose the right shares.
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