There is a saying that “investing in stock is
easy, but investing successfully is difficult.”
Investors, particularly those who lack basic
capital market knowledge, reportedly end up on
the losing end of bargains every year. This is
not because there is a lack of profit-taking
opportunities (there is an abundance of
opportunity), but because investors often fail to
gather the right information before sinking their
fortunes into the stock market.
To avoid such pitfalls, here are five things you
should know before delving in the world of
stocks.
1. Why the stock market?
The first question fresh investors should ask is
why am I choosing to put my money in stocks?
The stock market comes with healthy risks and
attractive rewards, both for short and long term
players. Investors are said to prefer the stock
market because the offer the greatest returns in
the short term. But stocks are also very volatile
as they are driven by speculations regarding
market activities, the value sometimes can fall
below the price you purchased. Hence chasing
stocks of companies with good reputation is
often your best bet.

2. Hiring a Broker
Now that you understand a bit of what you
going into, the next step is to employ the
services of a stock broker. A broker, or brokerage
firm, is a licenced to access the stock exchange.
Once you have hired one, he or she will receive
others from you (to sell or buy stocks) and
process on the exchange. They also help provide
guidance on which company’s shares you should
consider purchasing or relinquishing.

3. Building your portfolio
Given that the market is littered with risks and
rewards, it is important to keep the word
“balance” in mind when building your portfolio.
Ensure you have a mix of highflyers (stocks with
high growth rate), slow-and-steady (shares with
high prices but steady yields) and a few
gamblers (those that can either plummet or soar
quickly). This allows you manage enjoy the
gains of investing in stocks as well as absorb
unusual shocks.

4. Making money
Most people invest to make money, and it’s no
different for those who put their money in the
stock market. The capital offers two key ways of
making money: the first is by receiving dividends
from a company whose shares you acquired.
Dividends are small payments made to
shareholders when by the investee company. It
is done mostly when the company declares a
profit for an operating year. Another way is to
cash-in on your shares by selling them. You can
turn in a profit when you sell at a higher price
than you initially purchased them.

5. Alternatives
No doubt stocks are very attractive to investors,
but there are other alternatives that are also
very rewarding. Bonds, mutual funds, and
treasury bills are interesting investment
prospects to explore. Some though take a longer
time to germinate provide higher and safer yields
than stocks.
Investing is a great way to build wealth and
enjoy a stable financial status, so you can try
other investment products like bonds, mutual
funds, treasury instruments and other money
market funds.