There is an old metaphor saying, "Money makes money". This can be literally applied now a days to capital generation through stock market investment. Generally, people have savings in the form of cash or jewelry. But it is going to do nothing if the economy gets hit with inflation or currency value falls. So, what can be a safe investment which is reliable as well as productive? Well the answer is stock market investment. The stock market comprises of a system where partnership or shares of publicly trading companies are bought, issued and sold. But for a few people it is no better than a dark chasm and nebulous casino of savings gambling. Contrary to the common thinking, the stock market is a far better investment option than classical investment areas like fixed deposits and gold bonds.
Basics one should learn before starting stock market investments
It is a great pain to lose money and that's why nobody wants to lose their savings collected by hard work. Moreover, some people have a greater investment threshold than others. If a person is considering to divert his / her savings as stock market investment and he is upset about the loss that might occur, he shouldn't have invested in the first place. However, before investing one should have his mind clearly on a few things.
Here an investor sells any particular security owned by him too, another who is interested in buying it. Since both the investors cannot be absolutely correct, it can be called an adversarial system. For better understanding we can assume that, one investor will be profited and the other will definitely suffer loss.
The opinion of major investors, natural calamities, political and social instability, demand and supply, risk, and the abundance of or lack of alternatives. These factors compile with the relevant information released, which create a general sentiment (ie Bearish and bullish) thus influencing corresponding buyers & sellers.
Real profit lies in the price gradient of buying and selling a stock. The best time for buying is when other investors are pessimistic. Concurrently, the best time for selling is when other investors are optimistic.
Pros and cons of stock market investment
Similar to any other investment option, the stock market has its advantages and disadvantages too.
1. Great opportunity of extremely good returns in a short time window.
2. Minority ownership. It may sound like exaggeration, but putting money in the stocks of a reputed company also makes the person a part owner of the firm. It doesn't matter if the investment was large or small.
1. Brokerage commissions. Every time a person trades his shares, he becomes liable to pay a certain amount to the stockbroker's commission and it kills the margin of the profit.
2. Time consuming. Investing in the market is not same as putting money to win a lottery. Here one has to fulfill multiple formalities, hence it becomes time consuming.