What is stocks?
 

Stock investing is something that is easy to get started within today's technological world. It does not have to be capital intensive, to begin with. For many, however, it is difficult to know how to start and what an equity investment actually is.

 

With stocks, you have the opportunity to buy a share in a company. If you buy a share from a company, you are a co-owner of this company. This means that you get the right to vote on matters that the company raises during a general assembly and that you reap gains if the company pays dividends or the share value rises.

 

Companies can be privately owned, unlisted, or listed on a stock exchange, which is decided from what the company prefers. There can be many reasons why a company is listed on stock exchanges. It can be that the owners want to sell some of their shares of the company to external shareholders. The reason can also be that the company wants to raise money through a share issue,  that the inventor of the company wants to sell a part of the cake to make a profit for the developing the company, or that existing owners just want to get rid of the company. The reason can be so many, but as a stock investor, you get the opportunity to buy these free shares of different companies.

The reason why most investors make investments in companies and stocks is to try to achieve returns. Over time, the stock market has yielded extremely good returns. As an equity investor, you have the opportunity to choose which companies you think can provide a good return, and you think are managed by solid leaders and owners.​

stocks fund investment stock value index stocks stocks

S&P 500 long term chart.jpg
 

Source: investing.com

As you can see in the picture above, the historical return on equities has been solid. This is a picture of the broad S&P 500 index in the United States.  

A similar return has also been the case on the Dow Jones stock index:

Dow Jones - 100y.png

Source: investinghaven.com

Things to think about

 

It can be easy to get carried away when you see such an incredibly good historical return. One must remember that this is a return over a long period of time and that it comes from holding indices that follow the largest companies on the relevant stock exchanges. If you want to have almost the same return as the indices above, it is recommended to take a look at the sections we have about funds.  As you can see from the graphs, the better indices have also had periods of large declines. You should therefore have a long-term perspective on your investment if you want to buy indices that follow these.

As an equity investor, you must withstand large fluctuations and variable results. It can be difficult to succeed as an investor of individual companies. You should therefore try to find your advantage and own strategy if you want to try to pick individual stocks in the market. Both understanding and dealing with risk are extremely important if you want to succeed with your investments.

 

It is also an advantage to decide if you want to be a fundamental investor or trader. Both of these have their own defined strategies. Do not be a speculator who spontaneously buys something because it sounds good, or that someone has said that it sounds good. Then you might as well go to the lottery and speculate the money there.

Mastering the market as an investor of individual stocks, therefore requires that you find a strategy, learn and master it, follow the plan 100%, manage risk and make choices with this in mind. Avoiding too much complexity, but rather focusing on mastering a specific part of investing or trading can in many cases be the best thing.