Why do millionaires invest in stocks? Because investing in the stocks of publicly held companies provides a potential opportunity for investors to earn money and for companies to maintain a positive balance sheet. Online trading, which is the buying and selling of stocks on the Internet, has made it easier for the general public to open an account with a broker, research the best companies in which to invest and buy and sell stocks. This article will expound upon the benefits of online trading to both the investor and the company in which they have purchased shares of stock. It will also outline the beginning steps to online trading.
Putting one’s privately held money into a publicly held company that has maintained steady growth will potentially earn money on the money invested. For example, Investor Q has decided to buy $100 of stock in Company X because Company X pays dividends. In other words, Company X will pay a portion of their profit earnings to Investor Q on a regular basis. Depending on the potential of future profits of Company X, Investor Q could possibly earn an income above and beyond his initial purchase of $100 worth of stocks. Investor Q’s money is making money.*
If Company X does not pay dividends as part of their stock agreement but their stock price rises more often than it falls, Investor Q could possibly hold on to his stock and then sell it for a higher price than at which he bought it thereby increasing the value of his initial investment. The downside of this type of investment is that Company X’s stock price may never go any higher than at the time of Investor Q’s initial stock purchase. In fact, it may drop in price. Investor Q might end up selling his stock for a lower price and end up losing money.
Company X is offering stock in their company to the general public for mainly one reason: to generate an influx of cash. How they use that cash will determine whether their stock price is going to rise and possibly attract more investors, or the stock price is going to fall due to misappropriation of the funds and hence, the investors unload the stock from their portfolios. There are several ways Company X can use the cash to increase their bottom line profit. They can use it to pay off lines of credit so all future revenues, after expenses, are profit. Or they can expand their business by allocating the incoming funds towards buying or leasing a bigger building, acquiring more equipment and hiring additional employees.
There is always the risk of losing money with trading (buying and selling) stocks on the Internet. That is why it is very important for anyone who is considering online trading to do abundant preliminary research in the areas of financial planning, brokers, transaction fees, company performance, economic conditions and investor’s fickleness. Stock values can fluctuate from low to high and back down to low again simply because of multiple investor’s attitudes. Taking the time to find the best broker for your needs and the companies with the highest potential for increased profits will minimize, but not completely erase, the risk of financial loss. There are no guarantees of financial gain in the world of online trading but with the right amount of research and financial planning the odds of success increase.
The first step to take before making your initial purchase of stocks is to determine the amount of money you will need, including transaction fees, to set up an account with a broker. Does the broker charge an inactivity fee if you only buy stock in one company and hold on to it while making no other trades? Does the broker offer a lower per trade fee if you decide you want to do high volume buying and selling? Having a financial plan and, more importantly, sticking to it will mitigate the chances of overspending. The sole purpose of online trading should be to generate more income for the investor and the company.
Using a reputable online broker can make the online stock trading experience easy and safe. They will store the investor’s money and stocks in an account and based on the investor’s selections, facilitate the stock trades. An investor should always make sure the online broker’s website has high-level security measures to protect against theft and fraud. The website should have an automatic log-out after a certain number of minutes of inactivity on the site and all of the transaction transmissions should be encrypted to discourage hacker attacks.
Online stock trading has opened the floodgates for millions of individuals to buy and sell stocks. With adequate financial planning and research, online traders can earn extra income for future events such as college funds and retirement. That is what The Wealthy Investor Program is all about.
