10 Things You Absolutely Need to Know About Stocks

What You Need To Know About Stocks: A Must Know List

Investing in the stock market can be a great way to build wealth. But it's not for everyone, and often people are unaware of how risky investing can be. If you're thinking about getting into stocks, or if you already own some but don't know much about them, here are 10 things that you absolutely need to know before making any decisions.

10 things you absolutely need to know about stocks
In this Article

#1. People who make money in stocks take calculated risks to gain more rewards

People make money in the stock market by buying stocks of companies they think are undervalued and will eventually appreciate. They can also buy options contracts or use margin lending to magnify their returns on investments.

#2. You have a lot of options when it comes to trading stocks

Shares of stocks trade on the stock market. This is where they can be bought and sold depending on what people are willing to pay for them at a given time. Shares also trade in individual companies, but only among those who have ownership stakes in that company’s shares (i.e., shareholders).

#3. You can make a lot of money if you buy low and sell high

The most basic way to make money in stocks is to buy low and sell high. When a stock’s price drops, it becomes cheaper for those who bought the shares earlier to turn around and sell them at a profit.

#4. Stock Chart Doesn’t Have To Be Hard

A chart is a graphical representation of how the price of a stock has changed over time. Charts are useful because they can help people make better decisions about when to buy and sell stocks, as well as which ones might be suitable for investment.

#5. There Is No Such Thing As A Sure Thing

Stock analysts often make predictions about whether a company’s stock will go up or down. However, there is no such thing as a sure thing when it comes to predicting the future of stocks.

#6. There Is No Perfect Metric

There are a number of different metrics analysts use to judge whether or not stocks will be profitable. However, there is no “perfect” metric that can predict future stock performance with certainty.

#7. Dividends Are Your Most Trusted Friend

Dividends are payments that companies make to their investors. They’re a way for the company’s profits – and the investor’s investment – to grow at a regular rate, rather than relying on price changes in order to see growth.

#8. A $100 Stock Isn’t Expensive And A $20 Stock Isn’t Cheap

One of the most common misconceptions about stocks is that a $100 stock must be more expensive than a $20 stock. In reality, it’s fairly typical for companies with lower market capitalizations to have higher price-to-earnings ratios.

#9. Taxes Can Cut Into Your Profit

Unless you are holding an individual stock that pays qualified dividends, or a mutual fund with at least 90% of its investments coming from stocks that pay qualified dividends, taxes will likely take a bite out of your profit.

#10. Knowing what you need and getting the most for your money are important decisions

It’s important to know what type of stocks you’re buying, and how much the commissions will be. Some brokers offer commission-free trades for verified accounts or if you deposit a minimum amount into your account each month.

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