Investing in the stock market is one option to generate income with a small initial commitment. Before pursuing such an investment, however, numerous factors must be carefully considered.
A potential investor has various choices for purchasing stock or partial ownership in a company. Buy-and-hold is likely the most common investment strategy. Under this technique, an investor just retains his or her holdings regardless of the stock price. The shares are sold only after the investor has amassed sufficient funds to purchase a home, finance his or her schooling, or retire. Due to the restricted stock activity, this approach incurs fewer transaction fees, which is one of its advantages. Additionally, buy-and-hold investors can pay lesser capital gains taxes on their investments. Other strategies include plans for short-term trade and direct investment
To facilitate any transaction, investors must know where their target stock is listed and its stock symbol. Microsoft is listed as MSFT on the Nasdaq, while General Electric and Hewlett-Packard are listed as GE and HW respectively on the New York Stock Exchange. Vodafone is listed on the London Stock Exchange as VOD.L, Nintendo is listed on the Tokyo Stock Exchange as 7974, and Siemens AG is traded on the Frankfurt Stock Exchange under the symbol 723610.F.
The influence of business and economic news on stock price movement will be evident to novice investors rapidly. Internal variables that can affect the price of a company’s stock include a rise in sales and earnings, litigation, a management reorganization, and the release of a new product or service. The development of new market competitors, a shift in government policy, inflation, and other economic news are examples of external factors that might affect stock prices.
The information technology-driven “new economy” of the twenty-first century has enabled some companies or industries to take greater advantage of the market than their competitors. First-time investors would do well to identify and consider the stocks of these “niche” players. Nonetheless, such a selection should be supported by research, particularly concerning the management structure, expansion plans, product development, and financial results of the target company.
Given that stock market investors purchase shares of a company with the expectation of profit, it is imperative that they review the financial reports of their target companies to determine the potential for earnings growth. The Securities and Exchange Commission requires these annual disclosures, which are made in various months because businesses typically do not follow the same calendar or fiscal year. Investors should also be aware that certain companies, such as Sears and other retailers, typically report higher quarterly earnings immediately after the holidays.