Financial Freedom: Allow me to show you a better way

Investing in stocks is the best way to grow your wealth. This guide explains how stocks and the stock market work, and how to start investing in them.

Financial Freedom: Allow me to show you a better way
Photo by Junior Moran / Unsplash

A recent study revealed that people are more afraid of stock markets than they are of death. This is because the stock market is unpredictable and it's difficult to tell when a recession might happen. I know that just the word "investing" can seem like a scary concept, but it's not as scary as it seems. As long as you take the time to research and educate yourself about how to invest, you can reap the benefits of this great market resource.

The stock market is not just for the rich. It is a great resource for people who want to invest in public companies and watch their money grow.

Investing in the stock market carries risk, but when approached in a disciplined fashion, it can be a very rewarding experience.

The first step is understanding your needs and goals before investing. The most important thing to consider is what you are trying to achieve with your investments: if it is for retirement, then you are looking for strong growth potential. But if it is for more immediate goals like paying off credit card debt, then you may want to invest in stocks that pay dividends or provide stability.

The stock market is the best way to invest in the future.
Photo by Joshua Mayo / Unsplash

Studying the stock market can be a really fun hobby. There are many ways to get involved in stock trading such as by buying stocks outright, investing in mutual funds, or using ETFs. The stock market is a way for companies to raise capital and for individuals to invest their money for future returns.

What is a stock market?

The stock market refers to public markets that exist for issuing, buying, and selling stocks that trade on these markets. These are traded in one of three ways. They can be traded by traditional face-to-face contact with a broker; they can be traded over the phone, or they can be traded electronically.

What is stock?
A stock is a kind of intangible asset that belongs to an individual or company on the stock market. The keyword here is intangible which means it doesn't exist in physical form as the property does. A stock is the right to purchase a share of ownership in a corporation.  A person who buys stocks expects to receive profits and dividends in the form of cash payments from the company when it pays out profits.

You need to invest in the future right now
Photo by Ishant Mishra / Unsplash

How does the stock market work?
In this day and age, companies need to have enough money to invest in their own company. This means they need to sell their stocks in order to save up some money. This process is called “going public” or an IPO (Initial Public Offering). When a company goes public they are selling their stocks on the stock market.
The first stock markets were created for commodities like grain or livestock that could be transported from one location to another more easily than other types of goods. Later, they were used when people started trading things like shares in businesses and bonds that had fixed interest rates paid at set periods of time.

Example: (Source: How does the stock market work? - Oliver Elfenbaum)
Let’s imagine a new coffee company that decides to launch on the market.
First, the company will advertise itself to big investors. If they think the company is a good idea,  they get the first crack at investing, and then sponsor the company’s initial public offering or IPO.  This launches the company onto the official public market,  where any company or individual who believes the business could be profitable might buy a stock.

Buying stocks makes those investors partial owners of the business. Their investment helps the company to grow,  and as it becomes more successful, more buyers may see potential and start buying stocks. As demand for those stocks increases,  so does their price, increasing the cost for prospective buyers, and raising the value of the company's stocks people already own.  For the company, this increased interest helps fund new initiatives and also boosts its overall market value by showing how many people are willing to invest in their idea.

However, if for some reason a company starts to seem less profitable the reverse can also happen. If investors think their stock value is going to decline,  they’ll sell their stocks with the hopes of making a profit before the company loses more value.   As stocks are sold and demand for the stock goes down, the stock price falls, and with it, the company’s market value.  This can leave investors with big losses–  unless the company starts to look profitable again.  This see-saw of supply and demand is influenced by many factors.

Photo by Johannes Plenio / Unsplash

The world of investing is a complicated yet very simple one, there’s no denying that. There really are no shortcuts when it comes to building wealth, but finding the right information will definitely help you out on your journey.

Really what it boils down to is saving money and investing them. And if you want to grow your wealth towards financial freedom, then you need to understand how the stock market works, learn to pick stocks, and understand the psychology of the market. Yes, it sounds like a lot of hard work but believes us when we say that this knowledge will be worth its weight in gold!

So stay tuned with us to learn more about investing.

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