How to Start Investing in Stocks? Investments for maximum results are usually made in the long term. This is to achieve the financial goals of investors in the future, such as the cost of children’s education and pension funds.
One of the investments to realize these long-term goals is in the capital market. Unfortunately, there are still many of you who are afraid to invest in the capital market first.
The reason is complicated, only for big or rich investors, or others. In fact, however, this is not the case. Currently, investment in capital market instruments is quite affordable. Millennials can do it too.
How to Invest in Stocks: Quick-Start Guide
Stocks are one of the capital market instruments that are in great demand by investors. How come? Stock investing offers attractive benefits.
In addition, by buying company shares, you become the owner of the company. Can receive dividends and be entitled to participate in the General Meeting of Shareholders.
Lo Kheng Hong once shared anti-failure stock investment tips that can bring in big money, one of which is sleep.
When you already have stock in a great company, the best move is to “sleep.” Sleeping here means doing nothing.
Stocks are kept for the long term. By sleeping, you give a good stock opportunity to grow.
“Sleep is the path to wealth. A wise investor can make money while he sleeps. If you work hard, you will be provoked to sell shares,” he suggested.
Shares consist of two types, namely:
- Common stock
Among the securities offered on the stock exchange, shares are the most widely known product. Companies that issue or sell their shares are called issuers or public companies. Shares are the form of ownership that attracts the most funds from the public.
- Preferred Stock
Preferred stock is a combination of the characteristics of common stock and bonds. Preferred shares have characteristics like ordinary shares, which do not always give dividends to their holders.
So if the company suffers a loss, the shareholders will not receive the same dividend as before. In addition, the preferred stock also has the characteristics of bonds, which provide a fixed yield.
Bonds are medium and long-term debt securities that can be traded. Bonds contain a promise from the issuer to pay compensation, in the form of interest (coupon) for a certain period.
Then pay off the principal debt at the end of the specified time to the bondholders. Bonds are fixed-income investments.
The goal is to provide a relatively stable growth rate of investment value with the same risk, compared to stocks. Bonds are issued and sold with the aim of obtaining fresh funds from investors.
These debt securities can be issued by companies or corporations as well as the state or government. Bonds can be likened to time deposits, but the difference is that bonds can be traded, while time deposits are not.
Bonds provide fixed income to investors in the form of interest received per year, per month, or in other units of time according to the agreement and provisions in the bonds. Bondholders will not be included in the General Meeting of Shareholders (GMS), because they do not have leadership rights in a company.
Bonds are affected by interest rates. For example, the bank’s interest rate is lower than the bond’s interest rate, so bondholders can sell their bonds in order to make a profit.
So that the interest rate paid to bondholders greatly determines the sale and purchase price of bonds. The profit earned by bondholders is called capital gain.
One thing bondholders fear is the bankruptcy of the bond issuing company. Because this condition will make bondholders lose because the company will not be able to pay the market price of the bonds and the interest.
A derivative is one of the derivative securities consisting of:
An option is a derivative that contains a statement letter. A person or institution is issued that gives the holder the right to buy or sell his shares at a predetermined price.
Right is the right to hold new shares to be issued by the issuer. Where the issuer must offer the right to the old shareholder first.
Shares purchased using rights are cheaper than shares purchased without using rights. If the person or entity that owns the right does not use the right, then it can sell it to another party.
Warrants are securities issued by companies that give the holder the right to buy company shares. With terms relating to price, quantity, and validity period.
Warrants are sold with other securities, such as bonds and stocks. The purpose of issuing warrants is to attract investors to buy shares or bonds issued by issuers.
By issuing warrants, the issuer must provide shares or bonds in accordance with the desired amount. If the holder of the warrant does not use it, then he can sell it to the capital market.
Investors have the advantage of getting shares at a price below the market price. So that investors have the opportunity to get capital gains through the sale of their warrants.
However, warrants also carry considerable risks. These risks include, among others, when the market price is lower than the company’s, the ownership of the warrants becomes meaningless.
Because if many investors buy shares with warrants, the shares will be widely circulated and there will be a decrease in earnings per share.
Also Read: What is the Investment Banking
Mutual funds have two advantages, namely, first, they can be used as initial investments for newbie investors or those who do not understand the investment. The second is suitable for those who do not have time to manage or calculate the risk of their investment.
This is because there is an investment manager in charge of managing funds and reporting them periodically to investors. Mutual funds can also be an alternative investment for those of you who have small capital.
There are four types of mutual funds, namely money market mutual funds, fixed income mutual funds, mixed mutual funds, and stock mutual funds. Buying mutual funds is almost the same as saving, but mutual funds can be traded, while savings are not.
Direct and Indirect Investment in the Capital Market
Investment in the capital market can be done in two ways, namely:
Direct investment is done by buying stocks or bonds according to your wishes without going through an investment manager. Direct investing requires you to have an account with a securities company.
This investment also requires deeper knowledge and experience of the capital market, because you determine for yourself which shares to buy, the right time to buy or resell them.
Indirect investment can be done by utilizing the services of an investment manager. The investment manager is the party that manages your money to buy investment products.
The composition has been determined by the investment manager based on fundamental, technical analysis of stocks, and bonds that make up the investment product, known as mutual funds.
So it is clear that investors entrust their money to be managed by investment managers in the hope that the level of risk faced is smaller than directly buying stocks or bonds without the help of an investment manager.
Easy Ways to Invest in Stocks in the Capital Market
For those who want to invest in the capital market, here’s an easy way:
- Buying Shares in the Primary Market
- Buying Shares in the Secondary Market
- Buying stocks through mutual funds
The Key to Future Success is Investment
Investments can be used for the purpose of increasing wealth, or they can be used for retirement preparation purposes and children’s education funds.
For those of you who are still new to investing in the capital market and your funds are quite limited, you can start investing by buying mutual funds. If you have started to understand then you can try other investment instruments.