There are also additional costs that you may need to incur depending on whether you pay for advice on which stock(s) to buy. Investment costs are considered in more detail here.

The type of investments you undertake to meet your needs will depend on when your needs have to be funded. For example, if you are thinking of buying a house in the next couple of years, you do not want your money tied up in the stock market if there is a downturn in the meantime.

Check the link above to see more detail on how you might set investment goals to meet the various types of financial commitments you might have in the future.

The risk profile should determine whether the investor opts for a stable income stream with no downside risk to capital, or whether they accept large volatility in investments, with the promise of substantial capital gains in the future.

Check out the five risk profiles outlined here. Where do you fit?

The terms ‘stock’ and ‘share’ are often used interchangeably as are ‘shareholder’ and ‘stockholder’.

Stocks (or shares) are bought and sold through stock exchanges. These may be national exchanges such as the stock exchange of India and the Australian Stock Exchange (ASX), or they may be stock exchanges in major cities like the New York Stock Exchange and the Tokyo Stock Exchange.

There are different types of stocks. More detail is provided here on the types of stock available for you to consider.

Knowing the characteristics of different stocks will allow you to buy those stocks that fit best with your risk profile.

The general term for the stocks/shares that are normally of interest to beginning investors are referred to as common stocks or ordinary shares (both mean the same thing).

Investors normally buy and sell shares (or stocks) through stockbrokers who charge a fee called brokerage for the service. Brokers generally come in two main varieties, full-service brokers and online brokers who may also be discount brokers.

Here is a comparison between investment in the stock market, investing in property and investing in a small business to see the advantages of stock investing.

However, it is useful to be aware that there are a variety of strategies that are used for one reason or another, some of which are more common than others.

This beginners guide to investing suggests that you may have to refer to these terms from time to time when you need to know the meaning of a particular term.

I have reviewed a selection of the best investment books. They are well worth a read in order to expand your knowledge on value investing.


In Summary ...

This beginners guide to investing suggests that understanding the difference between speculating and investing, as well as the characteristics of different types of stock, will enable you to choose the stock investing strategy that best suits your risk profile.

Becoming familiar with the jargon will also help in developing your understanding of the stock market.

Beginners Guide to Investing - GO For It

Now that you know more about yourself and aspects of the stock market, the question becomes what will you buy? - and then, when will you sell?

And more importantly, how much money should you expect to make? I consider these important aspects here ...

Fantasy investing or virtual investing will allow the beginner investor to engage in free stock investing to develop confidence in buying and selling stock.

It is worth keeping in mind that while fantasy investing is risk free, the real world of stock investing is not. Making large 'profits' from virtual investing is no guarantee that the same result will ensue when turning to 'real' investing.

Check out safe investing to play safe! Safe investing (or value investing) involves buying when the share price is below what the stock or stocks are worth. That is, when they are at bargain prices.

Does this sound familiar? In effect it is the same as when you shop for household goods. Bargains occur in the stock market when it falls from time to time for various reasons. So the rule is – buy when there is a 'share sale' on.

Unfortunately, nobody puts out 'For Sale' signs. You have to recognize the signs. The best sign is when everyone else (the herd) has panicked. This is when you look for quality companies.

Another consideration is to avoid inherently risky companies. Some companies are definitely more risky than others. You need to know how to tell the difference. Check out the above link to find out how.

Did you know that many investors find selling stocks more difficult than buying stocks? Check the above link to find out why.

Because investing in shares is riskier than leaving your money in the bank or putting it in a term deposit, you must expect to get a greater return to compensate for the additional risk. But how much more?

The best known stock investors are flat out making 20 to 25 per cent from their stock investments in the longer term, so don’t expect to make that much. Start with a goal to make about half that amount, 10 to 15 percent over time. This will still be about twice the amount that you could earn from a fixed term investment with a bank.

Where will this return come from? It will come from dividends that companies pay to their shareholders on a regular basis, usually twice a year, as well as capital gain from the increase in the share price over time.

While the dividends will come on a regular basis, the capital gain will only arise when you sell the stock.

Dividend investing is used to describe the strategy of investors who wish to maximize their returns from dividends whereas investors who are more interested in capital gain prefer growth investing.

You should be aware that investing for value or value investing involves both dividend and growth investing. This is my preferred strategy.

These concise statements are what one may call 'basic truths' or 'truisms' about investing in the stock market. Some are also called 'rules of thumb' because they incorporate deeper knowledge expressed in a simple way.

I (re)turn to these concise statements from time to time to reinforce in my mind the wisdom that they encapsulate. I recommend them to you.