How do I start investing in the stock market?

EducationNovember 11, 2021

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Stocks are one of the financial products that attract the attention of many investors in the world because of their profitability. There are three ways to get your money into the stock market. The key below is to find which best
fits your desired style of investing.

How do I start investing in the stock market?

Besides the tens of thousands of stocks from which you can select, you also can invest in mutual funds, invest in exchange-traded funds (ETFs) or hedge funds, or have a stockbroker select for you.

What are methods of buying stocks?

1. Buying stocks via Mutual Funds

If you’re busy and have little time, stock mutual funds are the best option for you. Investing in stocks through mutual funds is very simple. All things you need to do is log on to a fund company’s website, complete some application forms, and zap them some money.

Mutual funds take money invested by investors and pool it in a single investment portfolio in securities (stocks and bonds). The portfolio is then professionally managed. Stock mutual funds invest primarily or exclusively in stocks (some stock funds sometimes invest a bit in bonds).

2. Using Exchange-traded Funds (ETFs) and Hedge Funds

ETFs are in many ways similar to mutual funds, specifically index funds, except that they trade on a stock
exchange. The chief attractions of ETFs to investors are lower operating expenses than mutual funds.

Like mutual funds, hedge funds are a managed investment vehicle. In other words, an investment management team researches and manages the funds’ portfolio. However, hedge funds are oriented to affluent investors. Typically annual management fee ranges from 1.0 to 1.5%, plus a 20 % cut of the annual fund returns.

3. Selecting individual stocks yourself

Good Reasons to Pick Your Own Stocks:

  • You possess a substantial amount of money to invest.
  • You’re a buy-and-hold investor.
  • You enjoy the challenge.
  • You want to learn more about business.

However, choosing a stock isn’t as simple as visiting a restaurant chain. The vast majority of investors are better off not picking their own stocks. Hence, amateur investors need to educate themselves and take responsibility for their own financial affairs.

Where do investors buy individual stocks?

Currently, investors can buy stocks easily through many different channels.

There are 4 common stock trading channels: brokers, the issuing company, securities investment funds, and individual investors.

1. Buying Stocks from Broker

One of the most popular and easiest ways to invest in stocks is through a broker. These companies usually require you to open an account and deposit money to trade in the stock you want.

With this investment method, you need to choose a trading code and enter an order at the right time. Brokers will ensure your orders are executed instantly during the open market and guarantee dividend payments to investors.

This is also the simplest and most effective investment method for Vietnamese investors who want to access and own foreign stocks.

2. Buy directly from the issuing company

Some companies allow you to buy or sell shares directly from the company without going through any broker. It saves costs (commission fees) for investors. However, you will not be able to buy or sell shares at the market price or at a specific time. You will have to buy/sell shares according to the company’s prescribed time – daily, weekly, or monthly and buy them at a price set by the issuer and resell them at a different price.

The direct method of dealing with the issuer is more complicated than buying and selling shares through a broker. For example, when you buy shares directly from the issuer, you are responsible for keeping them safe.

3. Buyback from other investors

You could buy and sell individual stocks from other investors. Suppose that a friend owns a certain amount of shares and you want to buy them back, then the transaction is entirely possible.

However, this method of trading shares is quite risky because they can fake certificates. If you want to buy this way, you’ll need to sign an exchange contract and then send it back to the company to re-register under the new owner’s name.

Investiki.com

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