How to invest in stocks: pros, cons and general guidelines


First of all, let’s define stocks. A stock, generally speaking, is a claim of ownership related to a company’s assets. Each company usually has 2 types of stock on the market: common or preferred. Preferred stock takes priority over the common kind, since its claim is bigger. Common stock enables the owner to take an active part in shareholders’ meetings and gives him/her a claim over company dividends. Preferred stock, however, does not entail voting rights.

It’s pretty simple: you own stock, you own part of a company. Whatever you own will be influenced by exterior factors, such as every activity the company is involved in, overall market conditions etc. top of the line companies issue blue chip stocks, and the benefit is that whomever can afford to buy such a stock gets access to lengthy performance histories that will always give you a glimpse into how a stock will perform in the future.

Most investors search for stocks that perform less and show growth potential; this way, they get a greater return on their initial investment, other than that, they get to exercise their abilities to correctly predict which way a certain stock will go. Such an example is illustrated by penny stocks, which are usually not available on large markets, because they only meet a few of the listing requirements.

What stocks represent

Why do companies issue stocks? Well, mostly to raise capital and get their business to grow. This way, they can expand their area in interest and take on new projects that will lead to further development. You get no guarantees when you go into buying individual stocks. Some of the times, companies pay dividends, but oftentimes they do not. Although some provide high potential returns, you should be careful and conduct thorough research before placing your money on the market.

How to survive market drops

The main idea is to own stocks long-term. The biggest flops of the stock market have had repercussions that lasted for decades, so do not be worried if things do not look up immediately. Market dips are your chance to “buy low” and oversell, so pay close attention to stock volatility and only act when the time is right. 

Major advantages

Another major plus that stocks offer is the income represented by dividends. Investors get annual payments even if the stock lost value; this is extra income, other than the profit obtained from actually selling the stock. If you’re planning on retiring, this might represent the easy solution to make some money on the side.

The last big plus we want to mention is the diversity involved in stock investment. Stocks rise or drop in value independently from, let’s say, bonds or real estate. Holding on to purchased stock will help you survive serious market fluctuations, and even economic crisis.


Whichever investment you choose to make, be fully aware or both risks and benefits before putting your money where your mouth is. Take your time studying the market, see how stocks evolve in the short run and place your bets considering all variables.

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