It’s no secret that marriages take work, and if you want to enjoy a long and happy future together, working to resolve problems before they happen is a good way to go about it. Any agony aunt will tell you that the two most important things are honesty and communication, but soon after that comes money, with financial problems being cited in 22% of American divorces. Everything is easier if you can avoid major money worries, so when you’re planning for your future, developing your finances should be a big part of that. One way to do so is to invest in the stock market.
Understanding stock
Most people have a basic idea what stock is – a piece of a company owned in exchange for financial investment, which the company’s owners can use to make it grow. There are actually two main kinds of stock: common stock (most of what is available to buy) and preference stock, which also allows the owners some control over what the company does (more than just an ordinary shareholder’s vote). Occasionally, other kinds of deals are made in relation to stock purchases.
There are two ways to make money out of stock. The first is to hold onto it until somebody wants to buy it for more than you paid for it (taking into account your costs and the rate of inflation in the intervening period). The second is to receive dividends, though not every stock purchase offers these. Dividends are, essentially, a share of the profit the company has made while you have been an investor.
The safest way to invest in stock is to spread your money across diverse assets. Professional investment companies can help with this, or you can follow the advice of experts such as Ken Fisher.
Understanding the stock market
Although private deals can also be made, the vast majority of stock is bought and sold through stock markets. Using a stock market no longer means having to stand in a crowded room waving your arms and shouting while people around you communicate in some obscure code. You can do it from your computer in the comfort of your own home. This makes it easier to make good decisions because you won’t be under the same kind of pressure, plus you’ll have the tools available to help you understand the numbers and to help you research companies, market sectors and the performance of the exchange itself. Pay attention to how these have performed over time and watch out for any red flags such as anticipated downturns or problems in related industries. Think about how long you want to keep the stock and whether or not it’s worth trying to ride out short-term problems. If there’s a high risk attached to particular stock because the company might not survive, the price should reflect this.
When to sell
Selling stock successfully is about waiting for the moment when you can get the best price and clinching the deal before the price drops again. This isn’t always easy to predict, but the important thing is not to get emotional about it (and not to blame each other for mistakes). It’s frustrating if you miss out on extra profit, but as long as you’ve made some profit, you’re doing okay. Getting sentimental about assets and holding onto them for too long can get you in much bigger trouble.
Stock market strategies
There are many different strategies for approaching the stock market. Common ones include the following:
- Using tracking software to identify good deals. This provides some security, but its effectiveness is limited by the fact that lots of other people are also doing it.
- Buying what everyone else is getting rid of. This is a good way to pick up cheap stock that may grow in value over time, but it can be risky.
- Focusing on growth and seeking out stock in companies undergoing swift expansion. This has big earning potential but is problematic if they overreach themselves.
- Focusing on value for money and looking for bargains, for instance, by investing in companies that are struggling but seem likely to recover and have good track records.
Stock strategy is key, as demonstrated by the investment guru, Ken Fisher: he has crafted his market strategies and theories over the years, and it has got him to his place of authority in the investment world today. Whatever approach you take, the real key is to be flexible and ready to adapt when circumstances change.
Finding out more
The most successful stock market investors are those who understand that there is always more to learn. You can find lots of helpful educational videos online. Today, these tend to be more useful than books as the market is changing rapidly and they’re more likely to be up to date.
Investing in stock is easier than it looks and is a great way to invest in your shared future.
