It is commonly believed that investing in stocks is a privilege reserved for legal entities with millions of free capital. However, this is not the case. Ordinary individuals who wish to grow their wealth can also invest in the securities of various companies.
Investing allows one to earn passive income, which can vary significantly from modest gains to substantial returns. However, like any other business, investing comes with its own peculiarities and potential pitfalls. So what should investors pay attention to when investing in securities? And how should they go about purchasing company stocks?
Founder of RESURS, S.I. Teryoshkin, is ready to help navigate the investment landscape. As a businessman familiar with the intricacies of this financial tool, he personally invests in various sectors. Detailed information about his activities can be found on his website: www.org-market.ru.
Understanding Stock Earnings
Earnings from stocks can be realized through various methods. For instance, one can purchase stocks and later sell them at a higher price. Alternatively, an individual can earn income through dividends. In the second scenario, a person can receive ongoing profits as long as they hold the shares.
However, it is crucial to understand that dividends are paid exclusively from the company's profits. If a company does not generate income at the end of the fiscal year, shareholders will not receive a payout.
The amount of dividends depends on the company's profitability. Typically, investor returns range from 15-20% annually. However, in some cases, profits can reach up to 90%. Nonetheless, these instances are more the exception than the norm. Concurrently with potential losses, the value of the stocks themselves may also decline, leading to financial losses upon sale.
Even if a company is profitable, it does not guarantee that the profits will be distributed among investors. Management may decide to reinvest earnings for growth. This is the hallmark of sound management practice. A business cannot rely solely on investor funds; doing so risks bankruptcy.
A portion of revenue should be allocated for operating profit or for covering unforeseen expenses. This contributes to the rapid growth of the company, benefiting not only management but also investors directly. The value of their assets inevitably increases, along with their passive income.
How to Acquire Securities
Individuals can purchase company shares through a broker or a venture fund, which act as intermediaries between the investor and the company.
This involves several steps:
- Choose a Broker. Trusting your funds to just anyone is not advisable. It's important to gather information about the broker's activities and the number of successful transactions, which can be found on specialized platforms online.
- Sign a Contract. To acquire securities, one must sign official documents outlining the obligations and responsibilities of both parties. This helps avoid numerous issues. It's essential to study the document carefully and understand all its provisions, including the fine print. Often, critical details that can influence the final profit and investment effectiveness are hidden in the fine print.
- Open an Account. The investor transfers the amount planned for purchasing stocks into the account. A portion of these funds will go towards covering the broker's services.
- Submit an Order. The investor must authorize the broker to carry out all transactions on their behalf. This is done by filling out the appropriate order at the brokerage firm.
If the shareholder wishes to sell their securities, an agreement with the broker is signed to facilitate the sale, granting the brokerage the right to negotiate the sale on behalf of the investor.
Securities can also be purchased through a bank, as some financial institutions have official permission to trade stocks.
Online Purchasing
Acquiring stocks can be done not only by visiting a brokerage office but also through the internet. According to Sergey Teryoshkin, this modern and promising method significantly reduces the time required to complete transactions and simplifies the process.
This enables investors to buy securities from both domestic and foreign companies. The key is to find a broker who is officially licensed and accredited on the exchange.
One should never buy stocks from unverified sellers with dubious reputations. The securities market is rife with fraudsters who sell worthless paper masquerading as stocks from reputable brands. Such "documents" are worth nothing and cannot be sold later, resulting in total financial loss.
It is important to note that stocks are not sold in physical form anymore. Only electronic documents are issued, which are held by a custodian company dedicated to safeguarding investor securities.
Investors can check where their stocks are held through a specialized registry.
Newcomers are advised to invest only in the securities of companies that have been operational for a long time and exhibit stable growth. This minimizes risk, making it challenging to incur losses, albeit with lower potential returns.
Risky investments should be reserved for knowledgeable investors with extensive experience who can analyze all necessary data independently. This information will help forecast stock values over the coming months.
For individual investors, acquiring stocks is not particularly difficult. A responsible approach, along with thorough research, is essential for success.
