Shares are the pieces of paper which represent ownership of a company. Shares are traded in the stock exchanges and are usually bought when the prices are low and sold when the prices are high. When a person buys a share, he buys a part of the ownership of the company. The incentive is the payout given out by the company as dividend usually at its AGM or Annual General Meeting. While many continue to hold onto stocks for that reason alone, a stock dealer can buy shares of a particular company a low price with the sole intention of making a profit when those shares will sell at a higher price. If the number of shares involved is high, and the price of an individual share is much higher than the buying price, the profit could be huge leading to a proverbial windfall. Such attractions of being able to make high profits in a short period of time get the investors flocking in to the stock market.
Be smart about choosing
Being a good investor is all about being a smart investor. It is very important to learn to invest or you might find your capital gone. Though the lure of a high profit may prompt you to buy an investment at a low price, it is quite possible that the share will not reach the high prices you want it to reach. You have to choose companies wisely and know about their performances to make such a purchase. Being market savvy in this case doesn’t just mean that you know about the workings of the stock market, it also means that you should know about a company and what it is going to do in the future.
Diversification is the key
While there are a lot of myths floating about how to succeed in the stock market, the smart ones who do not lose money are the ones to listen to. Success might not come to everyone overnight; however the ability to not incur significant losses on a hard day can be chalked up to a simple term called diversification. It simply means not putting all of your eggs in one basket. If there is a fall in prices and your savings are distributed evenly across your portfolio, you do not get wiped out and stay alive to make money another day.