Many traders invest in stocks, as well as other financial assets such as currencies or commodities, to build a diversified investment portfolio. This hedges risk, and increases the investor’s chances of survival. In the past decade or so, it has become much easier for individuals to start trading stocks from the comfort of their own homes.
Invest in Stocks Online – The Benefits
Buying and selling stocks can be very financially rewarding. Shareholders get paid a dividend (if the company decides to use profits in that way.) A dividend is essentially a share of a company’s profits. Therefore, the more shares you own of a corporation, the larger your dividend payout.
Investors can also generate a profit by selling their stock at a higher price (than they bought it at.) This is known as capital gains. It should be noted that there are substantial risks to consider when trading, as stock prices can fall. Online stock brokers allow individuals, who may be employed in other sectors/have no trading experience, to invest in stocks.
Accessing The Stock Markets
There are several different stock exchanges internationally, e.g. the NYSE or the NASDAQ etc. Publicly traded companies are listed on these exchanges, and their stock can easily be traded. Online retail brokers tend to charge traders on a “per deal” basis.
Essentially, punters pay a fix charge per deal they make – it doesn’t matter if they purchase 10 shares of Tesla , or 1,000 shares. This system is not ideal, as it may encourage investors to a
void placing many trades. It also encourages traders to place larger trades, exposing them to more risk.
Degiro is an example of an online stock broker, and they charge around $2 per trade (on UK shares.) You can also access the stock markets by spread betting, or contract-for-difference (CFD) brokers, such as IG Index. In spread betting & CFD, you do not own any assets, you are simply speculating. Therefore, you do not receive any dividend payouts (when you own/invest in stocks.)