hi chris,investing is making your money work for you by getting your money to generate more money. Investing in stocks has consistently proven to be one of the most profitable forms of investment available.
The benefits include:
- Immediate Buy/Sell so you can sell part of your investment any time.
- Very low transaction cost.
- The freedom to work at your own place, at your pace in your own time.
- Easy monitoring — log in to the market from anywhere in the world.
- Being able to maximise returns whilst spreading your risk.
- A predictable form of investment if you know what you’re doing.
- Putting you in control and freeing you of fund management fees.
- Considerable tax advantages.
Things to watch out for:
- The market can be a volatile place.
- You must acquire knowledge of what you are doing.
- You must monitor your investments.
- You must learn the discipline to enter and exit the market on entry and exit signals.
Many people say things like “I’d love to get into the stock market” or “If I had more money, I’d invest in stocks”. Many people also believe that to make a profit from the stock market you either need to be rich already, be a full-time investment trader or be a financial whiz.Not necessarily so.
Let’s take a look at this scenarios of ordinary people in the stock market to see how they fared. This will let us view how the process works, the different approaches, and how returns are generated.
Scenario :
John works in a manufacturing plant earning RM33,000 a year. After rent, living and personal expenses, John has managed to save RM1,500 over the past 6 months that he wants to invest in the stock market. John buys 1,600 shares in ABC Mining at RM0.90 per share (RM1,440). He also pays RM32.95 brokerage fees for buying the shares. In total, John has invested RM1,472.95.
Six months later John decides to sell his shares. He has kept an eye on the performance of ABC Mining and they have risen to RM1.19 a share. John sells his shares for RM1,904. He also pays RM32.95 brokerage fees for selling his shares, leaving him with RM1,871.05. That is a profit of RM398.10.
RM398.10 may not sound a lot, but remember John only invested RM1,472.95 for 6 months, so he won’t make a huge return. Nevertheless, John made a 27% profit which is far better than he would have made by putting the money into his savings account.
There are many benefits to be gained from this category of investment that may appeal to you. The major ones are mentioned below.
Income and Capital Growth -Public companies listed on the stock exchange normally pay their shareholders two dividends each year, an interim dividend and final dividend.
Highly Liquid - Shares can be sold within a matter of minutes of contacting a stock broker or instantly if you do the transaction on-line. And you will ordinarily get your money back within a few days of selling them. As share prices are published daily, you can make a quick profit if your shares increase in value.
Minimal Entry and Exit Fees - The brokerage fees stock brokers charge in respect to buying and selling shares is minimal. On-line brokers normally charge around 0.4 per cent of the purchase and sale price.
No Holding Costs - There are no ongoing costs associated with owning shares (as is the case if you own real estate). This is great news if you happen to own a substantial share portfolio.
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