Basics Of Investing

by khalid on 14/09/2011 · 1 comment

Before anyone starts investing in the stock market, there are some lessons he should learn in order to fetch maximum profit and incur minimum loss. The first objective of the newcomers should be focusing on the fundamentals of how it works and how to start investing. In this article, we shall discuss the various types of investments.

As is obvious, there are plenty of ways to invest in the market – each one has its risks and pros. The first way to invest is through Bonds. Every company needs capital to broaden its horizon, introduce new products and expand their market, even the government needs to improve the infrastructure of the company from time to time. When they need money, they issue Bonds. It is by far the safest method to invest; basically, it is a loan that the provider gives the company and it is preferable for those who don’t want to risk much.

The second type is stocks which are completely opposite from Bonds. It has high rate of risk but the profit possibility is high too. When you buy a stock, you become a part of the company, a partner in both the loss and the profit. If the company does well, it shares the dividend and if it doesn’t, your stock price comes down.

Mutual Funds are also a means to invest in the market. The difference is that people don’t have to invest on their own; they can take help of fund managers and investors who decide and take responsibility to invest your money profitably.

Options have high risks involved but they give high returns too. This method is advanced so it requires excellent knowledge of the market.

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