Today, the stock market has become an investment solution to many individuals, since it is easy to start trading, for anyone, by finding the right platform online. However, it is always better to learn to swim before throwing ourself in the sea. Here is how to start trading stocks online, and understanding what you are doing.
Why Investors choose the Stock Market
First, you need to understand why some investors prefer the stock market to other investments, such as the housing market or saving bank accounts. Investing in stocks can yield a much higher return than through other instruments, and they can do so much more rapidly. However, the reverse is also true: You can find yourself with great losses, when trading stocks. And depending of what you are buying, it can happen quite quickly. But, if many people turn to the stock market today, it is because they know that through good strategies, it is one of the most efficient money tools, that can be.
Online traders initially have to find a platform on which they will deposit money to buy stocks. This is a very important decision, and it should not be taken lightly. Thankfully, you can find information on them on comparison websites. Here is one where you can find the best UK trading platforms, to start trading in no time, once you have learned the basics.
What are the Financial Instruments you can buy on the Stock Market?
That is probably the most complicated part of investing in the stock market: What to buy? There are so many products today, beside traditional stocks, that it can take a lot of days, only to learn about the financial instruments available. Here is a very brief overview.
Buying equity shares will entitle you to receive a part of the profits paid out by the company through dividends.
Bonds are issued by governments, but companies as well. Through them you are loaning money at an agreed interest rate to be paid out to you, in return.
Investing in mutual funds means that you are placing your money in a basket, with other investors, and the sum of it will be used to buy various financial instruments.
Exchange traded funds, track indexes. For example, in London, it would be the FTSE. It gets you a share of everything that it includes, at lower cost, but with the same risk and return.
Derivative products have become a great part of trading today. They are always based on the performance of an underlying asset, which can be commodities, currencies, stocks, bonds, market indices or interest rates. Always keep in the mind the risk level before investing, and stay on top of the news.