For many people, investing in stocks may seem like a seven-headed bug. Most people are uncomfortable setting up a stock portfolio of their own because they are afraid they will not be able to choose the best stock according to their goals. But, not anymore. Check out 5paisa. The only online stock trading platform where you can choose the best trading portfolio according to your limitation, and under professional guidance. You don’t have to be a stock investor, but buying stocks directly is not the only way to expose part of your portfolio to equity.
Table of Contents
Active Investment vs. passive investment
The first thing you should know about this is that you can actively or passively invest in stocks. Active investment consists of choosing stocks to try to outperform the average market performance. Passive investment is simply trying to follow the benchmark, achieving a return similar to the market average. With that in mind, we can list three ways to invest in stocks.
Direct Investment – Direct purchase of shares by the individual investor. In general, it is an active investment. The investor needs to open an account with a brokerage firm, through which he will buy shares over the internet, via home broker, or over the phone via the trading desk.
Stock Investment Funds – Investment in condominium format. Investors pool their resources to acquire shares in a fund which will be invested in a stock portfolio set up by a professional manager. They may have active or passive management. They can also make use of many different types of strategies, focusing on different types of stocks or markets.
Exchange Traded Funds (ETF) – Strictly passive investment funds, also called index funds. They seek to follow a market index as closely as possible. They have stock traded shares as if they were equities, and generally lower cost than normal equity funds, even liabilities.
Is stock investing just for those who have a lot of money?
Equity investment is very accessible to the small investor from the point of view of the initial value of the investment. The initial value of the direct investment in equities and ETFs depends on the trading price of the stock or the share price at the time the investor decides to buy. As for equity funds, the popularization of online investment platforms has made even the most sophisticated funds of renowned managers accessible. Today, it is possible to invest in several of them for initial applications of a few hundred to a few thousand dollars.
The process of buying, and selling a stock does not end when a trade is closed. Within two business days there should be physical, and financial settlement processes. This means that the money only leaves the buyer’s account, and falls into the seller’s account two business days after the negotiation is closed. Always for the price that was agreed, of course. Trading in the stock market is only closed when the bid offers match price and quantity with the put offers.