How Do Individuals Buy Stocks? A Detailed Guide to the Purchase Process and Methods
A stock is a certificate of ownership issued by a joint-stock company. It is a type of security that a joint-stock company issues to shareholders to raise funds, serving as proof of shareholding and as the basis for receiving dividends and bonuses. Each share represents a shareholder's ownership of one basic unit of the company. Behind every stock there is a listed company, and every listed company issues stocks. Let's take a look below at how individuals buy stocks!
The Process of Opening a Stock Account
1. First, open an account at a securities company. I won't go into the details here. Nowadays securities firms all need clients, so when you go there and fill in the paperwork, they will take care of everything for you. If you have questions, just ask; it's no problem. But there are many securities firms, and you need to choose one. What to consider is the fee rate and the firm's reputation. Some securities firms will even recommend stocks in order to attract clients.
2. Go to the bank you have chosen with the account number you got from the securities firm, your bank card and your personal identification documents to set up third-party depository custody. This is easy to complete at the bank counter. You can deposit some funds into the bank card to make it convenient to buy stocks later.
3. Go home and download that securities firm's trading software, log in to your own account, choose the stocks you want to buy, and you can make your purchase.
Notes for Stock Market Beginners
1. Understand the basic introductory knowledge and rules of stocks (in the Securities Practitioner Qualification Examination, the two subjects of Basics and Trading can basically cover this step).
2. Study the traditional classic theories and methods of investment analysis (in the Securities Practitioner Qualification Examination, the Investment Analysis subject can initially meet the requirements of this step; in addition, you should read some classic books on stock market investment analysis).
3. On the basis of the first two steps, form your own understanding of stock market investment and develop your own understanding and theory of the reasons behind stock price movements.
4. Under the guidance of your own knowledge and understanding of the securities market, form your own methodology, tool system and trading rules. You can open a stock simulation account for practice trading, or operate cautiously with an extremely small amount of money. This way, combining theory with practice will produce better results.
How Do Beginners Choose Stocks?
1. Small market capitalization: the biggest characteristic of a potential stock. That is, the smaller the share price multiplied by the number of shares, the better, preferably within 10 billion. From investment experience, small-cap companies are more likely to deliver excess returns.
2. Low-priced stocks: low-priced stocks have greater room to rise, preferably within 10 yuan. The reasoning is simple. After decades, the highest-priced stock in the A-share market is still less than 300, and if you buy one at 100 or 200, then the return you can get is at most 3 times, but if you buy one at 10, you could potentially get a 10x or 20x return. But this does not mean that a low stock price alone is enough. Please do not view these principles separately.
3. Growth: growth mainly refers to the company's profit increasing year by year, with main business revenue also rising year by year, preferably with growth of more than 30%. This can be seen by reading the financial statements released by listed companies or related company news.
4. Good prospects: good prospects means that the products or services provided by the company will have huge future demand. For example, right now is a period when Internet TVs are beginning to become widespread, and in the future more people will use Internet TVs, which shows that Internet TVs have very good prospects.
5. Making a lot of money: the more money the company makes, the better, and it must increase year by year. Making a lot means the company can bring investors a higher return. This is easy to understand. Generally, it is at least 10 million a year.
6. Sub-new stocks: after many companies go public, some people may cash out, and the stock generally falls for 2 to 3 years first before rising. Stocks that are too old are also not good, because either the stock price is already very high or the performance is too poor and no one wants to buy them.
7. Look at performance: although by looking at the company's fundamentals you can learn that the company's performance is very good, all of this is in the past, and future matters are still unknown. It is best to find evidence that the company's performance is guaranteed for the next three years.
8. Competitiveness: the product or service has very strong competitiveness, others cannot beat it, and it is unique, such as Apple, Coca-Cola, etc. This also requires us to be good at discovering it in daily life.
9. Undervalued: undervalued means that the company's stock price is much lower than the company's own value, which is the so-called margin of safety. Market rules will eventually push the stock price up to a reasonable position.
10. Nurture dark horses: by the time you see a stock rising wildly, it is already too late to buy in. First, it is hard for you to buy it, and second, the main force is generally already selling off. Therefore, the stocks you choose must be ones that have not yet risen sharply.
11. Legal: this is the most basic requirement. Situations of illegal conduct and falsification often appear, which shows that the company or its executives do not pay attention to investors' interests. The broad base of investors should stay away from these companies.