The markets can seem like a complex idea to total beginners, and with all the investment opportunities available, it can be difficult to decide which are the best to choose to add some extra weight to your wallet. Whether you are starting out or just want to revise the basics, here is a short guide on investment options.
Stocks and Shares
Put simply, the stock market is where stocks and shares of different companies are traded based on their value, in order to make a profit should the price of a certain stock change. In essence, people try to buy stocks at a low price and sell them when the price rises.
This can be risky if a share you own drops or crashes, so the best way to avoid losing money is to research the company you will be investing in and make an informed decision as to who you think will perform best. Companies with good performance will see their share prices rise (and vice versa).
Forex stands for foreign exchange and involves buying and selling world currencies to make a profit from the fluctuating exchange rates. Macroeconomics can help when determining a currency’s potential fluctuations, as it involves looking at the overall factors which affect an economy, and thus the trajectory of a currency’s value.
Similar to stocks and shares, this method of investment generally involves buying currency at lower prices and selling it when the price rises. You can build your finances very quickly this way, but note that currency can and often does crash (due to unpredictable events such as political elections), so invest cautiously, as losses can exceed gains.
CFD stands for contract for difference, and trading CFDs involves investing in an asset without actually owning it. Instead, you invest in its market movements, and can often do this for 10% of the cost of a traditional stockbroker.
The high leverage presents the opportunity for greater risk and reward, so it is useful to learn the methods which professional traders use such as fundamental and technical analysis to stand the best chance of making money. It is best to start off small if you are a beginner and learn the basics to get to grips with market movements before going for larger investments.
Investing in the markets can be profitable, and some even make a full living from it. The best way to get started is to research and plan, and make sure you are using disposable invest-worthy finance, as you can both win and lose.