This is a guest post from Jonathan Delgagio and I requested the topic about investing in stock market for beginner.
Jonathan is a graduate of Brigham Young University in Provo. He developed a passion for finance after graduating and working at a Provo-based startup. Currently he runs his own website, beginningstocktrader.com, and does marketing consulting for startups.
You can always use Google Translator plugin which you can find below the screen and don’t forget to check your risk profile first before you decide to invest on anything.
Why You Should be Investing in Stock Market
Investing in Stock Market is Simple and Easy
The stock market is a foreign concept to a large number of people. It is often thought of as a tool that is primary for the rich to use to get richer, not a way for the average person to improve their condition.
This is unfortunate because the stock market is just that, a way to improve one’s financial condition. It is a way to actively benefit from economic and business growth in your country or in the world.
Purchasing stocks has also become a much easier activity to participate in. While people used to have to call up their stock broker and tell them to buy shares and sell share for them, there are now online stock brokers that do it all via electronics making it incredibly simple for a user to buy and sell shares.
(Dani: Read my story about how I learn the basic of stock investing from my mother – written in Indonesian)
Basic Concept of Share and Investing in Stock Market
To own stock in a company is to actually be a part owner in the company. This means that if the company begins to do well, make more money, and sell more of its product or service, then you, the stockholder will benefit.
You can benefit from a variety of ways. The most common is that the stock price goes up.
Let’s say you purchase shares of stock in company A at $4 a share. A year later that company announces a new product. It also announces that it will begin selling in China (meaning it now has over a billion more potential customers). Now people are willing to buy shares of stock in that company for more because it is worth more.
It has more customers and more products. You look and realize people are buying shares of Company A’s stock for $6 a share, so you sell your shares. You have made a 50% profit with little to know effort.
You were able to share in the success and profits of a company that you believed in. People that trade stocks do this every day.
(Dani: Read my post about free learning stock investing class from IDX )
Other Advantage of Investing in Stock Market
Another way you can make money buy owning shares of stock is via dividends. Dividends are cash payments companies will sometimes make when they are doing well, and have a lot of extra cash after paying all of their expenses.
Let’s say company A from the previous example decides they had a great quarter and they want to share with their stockholders. They issue a dividend of $.25 per share. This means you get to keep your shares of stock, but you will also get a 25 cents for each share you have.
The last reason to purchase stocks is to protect against inflation. A lot of people feel safer putting their money into cash or into a checking account. They reason that this way it guarantees that they will not lose money.
What they aren’t account for is inflation. The value of money is typically decreasing year to year.
(Dani: read my post about why you should never be tempted by the bank programs in Indonesian.)
Leave your money in cash for long enough and it could be worth half as much. Put it instead in the S&P 500 or Indonesia’s IDX and you will typically beat inflation in the long run.
If you are trying to park your money safely for multiple years, stocks is almost always a safe bet.
Resources You Should Know Before Investing in Stock Market
Many people feel wary of their own country’s stock market.
If you don’t have confidence in your government, economy, or country, you can always invest in another country’s exchange. The US has multiple indexes that are available for any investor to buy into. China, India, Britain, Brazil, and most other countries do as well.
If you don’t believe in your country, find one you do believe in and invest in theirs.
If you are interested in investing in stocks there are dozens of resources to use. I started with books, and made a list of the technical analysis books that I read to learn markets. Technical analysis is the way investors decide when it is a good time to buy and sell stocks and is an essential skill to start investing.
Udemy also has some incredible deals on courses for the stock market, many of which start at just $14. They are taught by long time investors and can prepare a beginner to invest for the first time.
Even if you do not have money to invest, it is important to understand basic stock market and financial concepts for when that time does come. There is a reason the rich are getting richer, and the stock market is a big part of that reason.
(Dani: read my post about 5 reasons why you should be investing in stock market in Indonesian)