Many today prefer to buy stocks online because they don't have the time to get involved in trading decisions during the day and want to take decisions only when they are free, that might even be at midnight. Also online trading service providers offer the individual a whole wealth of information to analyze and internalize before making the investment. Further the commission that these service providers charge on each transaction is much less than what on-floor brokers do. So the investor earns a lot more on every transaction.
But to be successful in the field of stocks one is required to have some primary knowledge as to what is what and investing on something will yield how much result. In this article we will briefly try to explain a few fundamental things that any investor on the stock markets should know. And since you will be investing online and there will be no guide for you, knowing these basics will definitely stand you in good stead.
Growth Buying Stocks
These are shares or stocks of companies which are making healthy profits over the recent few years. Since the companies are generating more revenue and are growing at a rapid rate, there stocks are on high demand. This pushes up the price because investors think even a high price is okay cause the stocks will keep on rising. Though that might be true for the recent future, there is a time when the prices will stop to rise or may even start to decline. To predict that time is what separates a good investor from an ordinary one.
Unloved Stocks
These are shares of companies that have not been doing well in the recent past, and hence investors are not to keen. When there is a lack of interest, the price per share drops and many investors believe that this is the right time to invest on them when you buy the shares for less, wait for the company to recover and regain its feet and then sell them at a high profit when the price begins to climb as the company generates higher revenue.
Small-cap
These are shares of companies that have recently come up. They are small in size and are still finding their way. You get their shares for less, but you are taking a higher risk too.
Mid-cap
Comparatively larger companies, which have been now around for a few years and have largely stabilized themselves. Stocks are prices higher than small-caps but involves less risk.
Large-cap
Shares of huge companies that have been around for ages and will be there for a long time. Premium-priced stocks with a lot of security.
High-speed internet connection and advanced personal computers have opened new gates for people who have always been interested in trading online but never had the inclination to be out there on the market and trade from the floor of the stock exchange. The other option he had was to let a broker carry out transactions for him, but then one lost out on the charms of trading. It was not something where you can be involved yourself.
Today you can conduct trade on stocks of all sorts of companies right from the comfort of your house. No hassles. No brokers. Nothing. But one must also understand that the internet has also opened up great avenues for scams to be carried out. The main reasons for internet being such a hit with frauds and tricksters are its ability to reach millions of people at one go and the ease with which one can hide his or her identity behind the worldwide web. Many experts believe that internet is a much bigger threat than the physical world when you are talking about someone being duped. Let us see how these frauds are carried out. We will discuss one here.
Internet provides a great opportunity to manipulate stocks which are unheard of and have very light trading. Say a broker wants people to trade on a particular stock. For people to trade on a stock, they must know about it, and then they must be made to understand there will be a definite positive gain in trading on that stock. What the broker will do is start a thread on that stock. Most discussion forums and threads in them allow the same person to post innumerable messages under different aliases. So the broker will create n number of aliases for himself and post messages about the particular stock.
The text of the message would of course be favorable toward that stock now with so much discussion about a particular stock and most of it being positive, investors will get interested. They have no way to find out that it is the same broker who has been posting all the messages under various aliases. Rising interest transforms to rise in activity on the trade of that stock. A stock is manipulated. A similar thing can be done by the PR executive of the company or a large shareholder of the stock. This is a definite abuse of the internet.
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