Making money from buying and selling stock and the general idea of the stock market is not relatively unknown to people. However, if we wish to indulge in the nuances of this craft, one must be patient and should be willing to learn the tricks of the trade. As dilettantes, we take one look at the stock trend graphs, and we feel completely lost owing to the sheer complexity of the data. This article will delineate on what stocks are, how to invest in them, and how to make money with them.
To put it in simpler terms, stocks or shares are ownership indicators of a company. If you own 100 shares of a company XYZ that has a million stocks in the market, that means you own 0.01% of that company.
This doesn’t mean anything to us from a buyer’s perspective. As a buyer, you don’t have any say in the company’s operations. The only money you’re entitled to is the dividends, which is the quarter-annual pay-out that companies give stockholders corresponding to the amount of stock they have.
Continuing from our previous example, if company XYZ pays a dividend of 50 rupees, then from the 100 shares that we have, we’ll get ₹5000 from the company.
Stocks are bought using a broker to buy and sell stocks for us. Stockbrokers are necessary to ensure fair play between both parties involved in the buying and sharing of stocks. The stock market serves as a marketplace, where people who own stocks sell them to buyers using middlemen, the stockbrokers. For college students like us, it’s best to use online stock brokers, as it’s much easier to do and a lot less time-consuming.
There are two ways to make money using stocks. The first method is to hold on to stocks for a long time, allowing them to rise in price. To understand this better, let’s go back in time to the launch of the first iPhone. If you had bought 100 shares when Apple went public, roughly around $2200, it would be worth close to $1.25 million now! However, this is over a series of 40 years and the wait was a long one. The second method, the one we’ll be looking at more closely, is ‘day trading’. This is the method of buying stocks at the beginning of the trading day and selling them for profit at the end.
Let’s look at a graph of a company’s stock price over a normal workday.
As seen above, the price of the stock varies wildly across the day. The direction of the graph can be estimated by using many technical tools, but there’s always an element of risk involved. Even for seasoned pros who do day trading for a living, the risk to reward ratio isn’t very high.
Technically analysing stock curves isn’t easy, but with experience, you can get better at it. If you aren’t confident in this, you can always approach a specialist who can offer you their guidance, but there’s a commission fee to be paid.
Succeeding in the stock market isn’t a huge mountain to climb. As long as one doesn’t either hold for too long or sell too quickly, money can be made from day-trading. Just take your time in doing your thorough research- watching YouTube videos or learning technical analysis, and after that, you will be seeing a lot of improvement!
Always remember to play it safe and learn before risking too much. Just how it is imprudent to put all our eggs in one basket, one must never put too much money into any one stock. Doing all this and following the rules with patience and fervour will guarantee a good return over time.