How To Invest In Stocks And Bonds

 

Stocks and bonds are a very serious business. If you carefully think ahead about your finances and your purchase plan, then you have the possibility of making a fortune off the stocks and bonds in the future by investing in them. If you don’t, you may find out that you’ve spent a large amount of money on stocks and bonds that nobody wants anymore.

First off, What’s the Difference Between Stocks and Bonds?

Owning stocks represents owning a percentage of a company. If a person owns, say, 40% of a company, then he owns 40% of its profits and market value. The group of people that own stocks in a company which when put together make for the full value of the company are called shareholders which have the first word when it comes to administrating the company, since if the value of the company increases, so does the value of the stocks they are in possession of.

Having a bond doesn’t represent actually owning a part of a company. It means that the company owes you a certain amount of money without you being a shareholder.

With the bond, it is quite simple- you pay the company a certain amount of money and state in the contract what the interest rate is and when you want to receive your payment back. The contract forces the company to pay back the money you gave them plus the interest rate when the time comes. As such, bonds do not depend on the actual success of the company and their value stays somewhat equal. It’s the stocks where it gets really exciting.

Tips To Invest In Stocks

Read about how stocks and Bonds work. Stocks will increase in value the more well-known and successful a company is. You may find stocks for a company at a dirt cheap price, only to see one year later that the prices for them are through the roof as the result of a very successful product they have released or some other means of acquiring fame and better sales. Bonds are a debt obligation from the company to you but you are not an owner or shareholder. This is where the thinking part comes in.

Think very well about the company you wish to purchase stocks from. Think about the future of the market it specializes in, since that may dictate how well future business will go. For example, robotics may be very successful in the future while mail might now. It’s all about future planning. You need to carefully study the market to invest in stocks.

Read about the most recent financial results (Balance sheet, Profit & Loss statement and Cash flow statement) declared by the company. Look at the current assets and liabilities owned by the company. Just check how Chairman, CEO, and sometimes CFO or other high-ranking officers view the company. Just check the 7 keys to successful investing.

Plan ahead of time for everything when investing in stocks and bonds. Allocate time and money according to your financial situation. Don’t buy stocks that seem oddly cheap as the company is most likely doing badly, so the current stockholders want to get rid of their stocks.

Once you’ve thought about your purchase, it’s time to find the right stocks and bonds broker for you. There are plenty online, and you should choose the ones with the best reputation and invest in it.

If you’ve made the right decisions, it is now a waiting game. Your stocks may fall flat, but don’t give up, you may still find out that they can make a comeback. Knowing when to sell is also an important thing to know: you don’t want to sell too early so that the stocks don’t get to their maximum value, but also not too late or they may get past their golden hour and begin to plummet.

Investing in stocks and bonds is about luck, but the planning factor will determine your success.

References:

http://www.russell.com/us/education_planning/investing_basics/articles/stocks_and_bonds.asp

http://www.ehow.com/how_2337320_invest-stocks-bonds.html


Rinkesh Kukreja is a part time passionate blogger, technology enthusiast, The founder and editor of HowZzDat - How of Everything. He started out with one website as a hobby and now loves writing articles on various niche.

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One Response to “How To Invest In Stocks And Bonds”

  1. Alan says:

    Great introduction to investing in stocks. Another tip is to have money to invest with in the first place! :p If you’re only trading with $100-$1,000, the brokerage commissions might eat away at your profits.

    That’s my first tip that I give my friends who are looking to invest; make money and then save it so you can invest!

    Amazon also has some really good books on the basics of investing. Authors like William O’Neil and Benjamin Graham are essential if you’re looking to get into the stock market.

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