Stock is a long-term investment. As a stock holder person of a company, we can get a return in investment of the company's profit sharing based on number of shares we hold. We also potentially get profits from re-selling our stocks. We often call it ‘capital gain'.
Nevertheless, investing in stocks is not a risk-free investment. Investor who want to trade stocks, need to understand and know his investment goals, including measuring the risk of a company they buy the shares.
Before entering into the stock market, the important thing is, decide first your motivation to buy a stock. Are you plan to get short-term profits by selling and buying stocks a.k.a stock trading? Or, do you want to be a long-term investor? Long-term investors are not only targeting the advantage of rising stock prices. They also wanted to get a dividend or part of the company's profits.
Otherwise, for a stock trader, dividend is just an added value because the main goal is short-term capital gains.
However, in the context of financial planning, stock is a long-term investment tool. Therefore, the process of stock selection should be based on fundamental analysis of the company's performance. That means, you have to understand how to read financial statements and know the ins and outs of the company's business that you want to buy shares.
This is different from the trader. The technical analysis is made based on the share price fluctuates more dominate their investment decisions.
You should also pay attention to the liquidity factor. That is, how easy the shares to be traded. Typically, the more the stocks are traded, the easier it is to be traded.
There are two options for those who are just starting out stock investment. An investor can transact their own with the online service or use the services of a broker from trading securities. However, before doing an online transaction, investors should gather sufficient information about the world of stocks.
At this early stage, there is no harm for investors to use the services of securities to obtain assistance and related research of leading stock issuers. This is to make easier to investor for selecting stock to buy. In addition, the analysts will suggest to you to learn a trading plan. By having the trading plan, the investment can be measured, both risk and potential returns.
[image taken from: sendaiben.org]
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