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Stock investing 101 for beginners

Stock investing 101 for beginners

While financial uncertainty emerges during Corona, stock markets are increasingly gaining popularity, especially among retail investors (also known as amateur- or individual investors).

That is mainly because the rise of the pandemic has forced people to take on more risk and, setting aside money in a traditional savings account, bears the risk of inflation and low interest rates.

And, albeit safe, its purchasing power will erode over time.

What you should know about Investing

1. Saving vs. Investing
2. What is the Stock Market?
3. ETFs
4. Dividends
5. Crypto Volatility

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1.  Saving vs. Investing

In a general sense, saving money typically means that it's available whenever we need it, with a low risk of losing value.

On the other hand, investing carries a long-term horizon, such as a college fund or retirement. The purpose of both instruments is to set aside money for the future, with the main difference between the two being risk.

Another difference is that we want our investments to make us money, while saving is often simply a way of keeping our money safe with little or no return.

2. What is the Stock Market?

If you are new to stocks or the stock market, research data might be overwhelming. And reasonably so. Here we try to narrow it down for you in straightforward terms.

Stock markets are where individuals and institutional investors come together to buy and sell shares in a public venue. Nowadays, these exchanges are electronic marketplaces.

It exists for issuing, buying and selling stocks that trade on a stock exchange or over-the-counter with a clear investment strategy in mind.

3. ETFs

ETFs (Exchange-Traded Fund) are low-cost fund options that are passively tracked by an index, sector, commodity, or other assets, but that can be purchased or sold on a stock exchange the same way a regular stock can.

Investors will have the option to buy and sell ETFs throughout the day and are usually a less risky option in the long term compared to buying and selling stocks of individual companies.

The price of an ETF's shares will change throughout the trading day as the shares are bought and sold on the market.

4. Dividends

Simply put, a dividend is a company's earnings or profits that get distributed to its shareholders after being announced by the Board of Directors.

It can be paid out in cash or through additional stock. A stock dividend is paid per share, but beware because not all stocks pay dividends. Larger, more established companies with relatively predictable profits are often the best dividend players.

Industry sectors such as banks, healthcare, pharmaceuticals, utilities and oil and gas usually maintain a regular record of paying dividends.

Bear in mind that dividend payments will impact share price, which may rise on the announcement approximately by the amount of the dividend declared and then decline by a similar amount at the opening session of the ex-dividend date.

5. Crypto Volatility

You can buy cryptocurrencies through exchanges or stockbrokers, but regardless of where you get it from, consider the risks involved before investing in digital assets.

Cryptocurrencies may go up in value, but many investors see them as mere speculations. A well-managed business increases its value over time by growing its profitability, where in contrast, cryptocurrencies generate no cash flow.

This is considered as "the greater fool" theory of investment.

Choosing the best Online Broker

Be certain about your financial goals before trying to filter through online brokers by asking yourself a few questions first.

Once you know which investments are best suited for your specific needs you can start evaluating online brokers by considering factors such as commissions and structures, minimum requirements, fees on technology, software, platform and reporting, financing rates, and market reputation.

MEXEM understands that broker’s commission may be the difference between success and failure with investments. That is why the company remains committed to a low commission structure and leading the way for lower fees in Global Markets.

With minimum requirements and zero fees on a strong market maker-designed IB Trader Workstation (TWS) platform, MEXEM has a competitive edge and renowned market reputation to begin investing today.

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