How to Understand the Stock Market

Posted on Thursday 23 August 2018

There are many individuals who aspire to do well for themselves by investing in the stock market to properly prepare themselves for retirement. However, making the right investments at the proper time is often easier said than done. Stocks and shares can be quite nuanced on many levels. People want to invest and create a new stream of passive income, but without the right knowledge, they are more hesitant to do so. The majority of the masses want to know and understand where their money is going, as they should. Thankfully, there is some information out there regarding the stock market. Especially for Canadians. Some of the best intel actually reads as follows:

Know the Basics

First and foremost, individuals who purchase stock shares are purchasing pieces of the particular company. Investopedia explains that stocks can rise and fall depending upon sales and overall market perceptions. This can be somewhat of a conundrum, especially for people who are looking to invest in stocks which they know will generate profit. Most investors typically purchase stocks from companies which they believe will garner revenue or otherwise increase in value as time passes. Sometimes they're right and other times, they're wrong. Some of the savviest individuals consult with financial advisors prior to making major investments.

Select the Proper Brokerage Firm

Selecting the right brokerage firm is a critical part of investing. Using the aforementioned brokerage firm, the investor will then open up a brokerage account, explains The Balance . After setting up their brokerage account, investors can then deposit funds via their checkings or savings accounts. Once that cash has been transferred into the brokerage, the person can decide which stocks they wish to invest in. Brokerage accounts can typically hold a variety of investments which include stocks, bonds, REITs, ETFs, MLPs, mutual funds, money markets, and certificates of deposit.

Know When to Buy and Sell

In regards to understanding the stock market, timing is everything. In other words, knowing when to buy and sell stocks is critical for investors who aspire to earn profit. City Falon explains that the relationship between buying and selling stock shares is somewhat intertwined; the best time to purchase stock is when others are thinking of selling. Conversely, the best time to sell stock shares is when other people are thinking of buying. This is also commonly referred to as buying low and selling high.

Don't Delay

The best time to get into the market is always right now. Unless you're still looking for a job and have no savings, you should be looking at maximizing the return on the funds you do control. Making money from the stock market might even give you the financial wherewithal to negotiate for a pay raise at your workplace.

Final Thoughts

Successful stock market investments certainly require a fundamental understanding of the market, knowledge of which stock shares to purchase, and a degree of intuition regarding the proper times to buy and sell. Whether you have a 9-5 job or you're a single female entrepreneur in Toronto, doing research, watching videos, and even consulting financial experts prior to making investments is strongly advisable, especially for first-time investors or other individuals who are not particularly familiar with the ins and outs of the market.

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