If you’re not a stock trader, it might be hard to understand why trading in stocks is so appealing.
It can be challenging to understand the nuances of buying and selling stocks. But if you’re considering opening an investment account, understanding what it means to trade in stocks can help you make better decisions.
For example, you can find online stock trading apps and flexible platforms that make investing super comfortable for you.
Here are four reasons why you should consider trading stocks:
➥ Investment choices
There are many different types of investments you can choose from. One way to invest is by buying shares in companies with a bright future and growth potential.
Another option is to purchase bonds, which companies or governments loan money with a promise that they will be paid back at a set period with interest added.
Mutual funds are similar to stocks but have been professionally managed by an investment team, so people don’t have to worry about picking the right stocks for their portfolio. Exchange-traded funds (ETFs) allow investors to buy into an index fund that tracks the performance of different assets like stocks or commodities without picking individual securities themselves.
This gives them more diversification than investing in just one asset class like real estate would provide alone but still allows some control over how much risk they want their portfolio exposures.
➥ Lower transaction costs
While it may not seem like much, the fees charged by your broker can add up over time and make a big difference in your investment gains. With a traditional brokerage account, you’re generally charged commissions on every transaction you make.
You’ll pay between $4 and $7 per trade, plus an additional fee for each leg of a stock split or dividend reinvestment plan (DRIP). These charges can add up if you’re making several trades per year—but fortunately, there are ways to avoid them entirely.
➥ Bet on the price of stock either rising or falling.
One of the most popular strategies is to place a bet on a stock’s price. You can bet that the price will rise or fall, and if you’re right, you will make money. However, if you are wrong and the stock’s price goes against what you expected—either up or down—you will lose money.
This type of market allows for some flexibility in trading because it allows traders to hedge their bets by using options or futures contracts to offset their losses in other areas of their portfolio.
➥ Short-sell a stock
Short-selling is a way to make money when the price of a stock goes down. You borrow a stock, sell it at its current market value, and then repurchase it at a lower price. If the price drops, you make money on your short sale.
You can also use this technique to hedge against losses in other investments or as an alternative source of income when the market isn’t doing well or if you’re waiting for something specific to happen before trading again.
“Save for retirement with our active or automated Traditional, Roth, and SEP IRAs,” says SoFi advisors. If you’re thinking of trading in stocks, there are many ways to do it.
For example, you can choose to do so online or on the phone with an experienced stockbroker. The best way to get started is by learning what you need to know about trading and ensuring that your money is safe when trading happens online.