buying and selling of securities such as shares, mutual funds, bonds etc. the task of buying and selling is carried
out through an investment broker who acts as a middleman. The broker must be authorized and must have a license to
carry out the trade transactions. The market where the trading of securities takes place is known as a stock
market. The various companies that want to indulge in trading need to be listed on the stock market or stock
exchange. The public listed companies offer their shares to the public for subscription.
By subscribing a
share one becomes a part owner of that company on the basis of the number of shares owned by
him. The companies also give out dividends to the share holders. Dividends are given out of the profits earned
by the company. There are two major ways of earning money out of the investments. One way is when the value of
the share increases. This is called capital growth. Then the other way is through dividends. The more is the
number of shares in a company, the more is the amount of dividends received by the share holders. This is
known as income investing.
There are two types
of share markets. One is the primary market and the other is the secondary or stock market. In the primary market,
only the newly issued securities are bought and sold. Whereas, in the secondary market the already existing
securities are traded. The secondary or stock market is a lot larger than the primary market. One should also
realize the fact that dealing in the stock market is a risky affair. And it is considered better to invest in
shares of a bigger company as they are a safer option due to their credibility, higher profitability and large
dealings. The smaller companies are however somehow less trustworthy and they also earn lesser profits. A lot of
people are also attracted towards bonds and pension funds. But they offer less return. The rate of interest
received by dealing in bonds is very less. So, investing in shares is a good option. The returns are better and the
rate of interest is higher.
It does not matter
whether one starts at an early stage or at a later stage; the most important point to be noted is that one should
be aware of their financial objectives and goals. One cannot just vaguely enter the investment business. One should
have the right motive and a proper strategy while entering in the world of investing. There are a lot of
investments. And one should choose the one that suits him. Like mutual funds are suitable for persons who want a
relatively higher return with comfortable amount of risk. Retirement investment is a good option for the ones who
want to secure their future. The earlier one starts investing for their retirement the better it is. Then there are
certificate of deposits also known as CD’s are for the persons who want a long term guaranteed return. The CD’s
offer constant growth and they are considered a safe way of investing your money.