Your money is important to you, so advice for buying shares can help you make wise investment decisions. Here are some hints and tips to help you buy shares that best suit your needs and will offer you the best possible returns:
Choose the type of investment you want to make
No two investments are the same so you need to decide what you want to get out of your capital: are you looking to grow your capital with shares which have increasing prices? Or are you looking for shares which will pay high dividends and create an income for yourself? Essentially, the choice you have to make is between growth and income.
- Growth of share prices is caused by a variety of factors. However, the price of shares can plummet just as quickly as they rise. For example, a company could introduce new products, technologies and services that cause excitement and cause the share price to increase; but if the technology goes wrong the share price can quickly decline.
- To work out the income offered by the share you need to conduct significant research into the terms of the agreement.
Understand that you are taking a risk with your money
There is no such thing as a risk-free investment or a sure-fire winner. The prices of shares and the income generated from them can go up, but can also go down. The past performance of the shares is not always a good indicator of future performance. All investments should be approached with this knowledge in mind. That being said, investing in shares can be very rewarding and the greater the risk often means the greater the reward.
Before you buy shares, you need to choose the level of risk that you are comfortable with – would you prefer shares with lees risk and lower returns, or higher risk investments that have the potential of providing higher returns?
Understand how the company you invest in makes its profits
Companies listed on the stock market make their money from a range of business practices, both retail and service related. Make sure you know how the company you invest in makes its money so you can see if the sector id performing well in general. Consider visiting a local branch of the company to find out more about them and how they are doing. The more informed you are, the better your ability to make wise investment decisions.
As a share-holder, you are actually a part owner of the company. This means you need to know who and what you are trusting with your money. You can review the company’s annual report to see if you like what they say and see how the business has performed in the past and where it is going in the future. These reports can often be accessed online.
It is also worth keeping an eye on the company directors’ dealings – if they’re buying shares in the company it’s a good sign that the company is doing well; if they’re selling shares this shows a lack of confidence in where the business is going.
Watch the numbers
Keep yourself up to date on the company’s financial indicators as well as the general market performance. Make sure you know which sector the company is in so you can check up on it. Look for changes in the share price and the share percentage price change.
Don’t stick to one company
Investing in a range of companies helps to reduce the level of risk you put yourself at. If you put all your money into one company that goes bust, there goes all your money! If you diversify into different sectors you also reduce your overall risk. At the same time, it’s best not to invest too little into too many companies. The best thing to do is to choose sectors that are doing well and invest you money in successful companies in these sectors.