How to Invest in Stocks - More than Just Buying and Selling Stocks

Stocks markets worldwide are littered with uncertainty and volatility. If you are a beginner investor and put your money in the stock market, chances of you making a profit are dwarfed by the probability of losses. The good news is that there is more to investing then just buying and selling stocks.

Bonds

Investing in bonds is a great way to invest in stocks if you don’t prefer buying or selling stocks. Unlike stocks, which give you an ownership in a cooperation, bonds are a form of a long term debt in which a company commits to pay the principal amount on a set date in the future. Bonds are used by companies to raise cash. They borrow money from the general public by issuing bonds. People buy bonds and over the time an interest pile up, which results in profits. Every bond has a certain par value. For example, if you buy a $1000 bond with a 4% coupon, you will get $20 twice a year until the bond reaches its “maturity” date. You get the principal amount on the maturity date. Bonds have almost no risks. Bonds are the best investment for income investors.

 

Mutual Funds/ETFs

Instead of buying or selling stocks individually, investing in mutual funds is a great option to invest in stocks. Mutual funds let you invest in collectively along with other smart money managers. A mutual fund is like a hedge fund, with a goal and structured investments. Money managers create mutual funds and pool their money and invest in different companies. Mutual funds is the best option to invest if you want to diversify your investments. Mostly, mutual funds consist of several equities, bonds and other securities.

Spread Betting

If you are want to know how to invest in stocks, but don’t want to limit your options to just buy and sell stocks, spread betting is one of the most useful investment tools for you. In spread betting, you bet on the price movement of a security. A spread bettor (usually an intermediary company) quotes two prices: the bid and offer price. You will bet whether the price of the security or stock will be lower than the bid or higher than the offer. Spread betting is done through spread betting companies. For example, if a spread betting company quotes a bid of $400 and an offer of $403 for a stock, you can either bet the stock will go over $400 or lower than $400. You could "bet" $2 for every dollar that the stock falls below $400. Let’s assume the stock falls to $390. You will make $20. But if the stock goes to $415, you will lose $30.