These days the world of trading is much more accessible, thanks in large part to the rise of the internet.
Read on to find simple ex
planations of finance lingo, how internet trading works and
we even throw in some quick, easy steps on how to get started.
1. What is a share?
A share is literally a “share” of a company, or in other words a small interest in a company, which can be bought and sold. They can increase or decrease in value depending on the fortunes of the company.
A share price will generally reflect the value of a company, so you can acquire shares in some companies relatively cheaply while other company stock costs a bit more.
If you choose to invest in companies that are “on the up” so to speak, then you can sit back and watch shares purchased for a small amount of money grow into ‘pots of money’ relatively quickly!
A quick example is Apple Computers. When Apple was founded back in the early 1970s, it was a risky start-up enterprise and nobody knew it was to grow into one of the most successful global corporations that ever existed.
There were originally three shareholders in Apple Computers: Steve Jobs, Steven Wosniak and Ronald Wayne. Ronald Wayne pulled out soon after the company was founded. He sold all his stock to the remaining business partners in the early 1970s for a reported $800 US dollars.
If he had held on to that decision though, he’d be a multi-millionaire today as the value of Apple Computers was to shoot up meteorically in the late 1970s, as personal computers grew in popularity and venture capitalists threw their weight behind the fledgling new company that was Apple Computers.
2. What is a dividend?
A dividend is a profit paid to shareholders of a company. So, if you purchase a share and it increases in value, this “profit” is expressed in terms of dividends, which get paid to shareholders because the value of their company shares has increased.
3. Trading and risks
Trading on a stock exchange is a relatively risky way to make money. It is very important to remember that you can also lose money as well as win big.
If you buy a stake in a company that later rises in value you will reap the financial rewards of this as your stock can quickly and spectacularly increase in value, but there is a flip side to this, as shares can also lose their value quickly and spectacularly.
The trick is to invest in companies you think will do well in the coming years, but there are no guarantees, which is why trading has historically been the preserve of wealthy people who could afford to take risks.
4. Getting started
To get started with online trading, yes you've guessed it, you need the internet! Lots of stock exchanges like the Johannesburg stock exchange, the London Stock Exchange and the NASDAQ have useful online tools and information which can help you understand the process.
You can set up an online account in a few minutes with banks like Halifax and Barclay's using a credit or debit card. You will typically need to pay a minimum amount of deposit to get started. In a lot of cases the minimum deposit is approximately £100.
Alex has more than six years of experience as a professional blogger and writer, during which time he has created hundreds of excellent blogs. He has a sharp understanding of business and current affairs and is glad to impart his valuable and highly regarded words of business wisdom in his blogs. Alex’s business blogs are published all over the world, and are very well-received in many quarters.
