The stock market can seem a long way away from the man in the street, however it is such an important area of financial trading that everyone should have a basic understanding as to how it works. From hot penny stocks to unit trusts to purchasing individual shares there are so many ways to invest in the stock market and investment vehicles that enable you to take a high risk or a low risk investment strategy.
Most people already have an investment in the stock market. Anyone who has a pension fund will have some of that fund invested in the market. If you ever read the pension report that is sent to you annually you will see in the report how the money within the fund is invested and you can guarantee that a large portion of it will be in stocks and shares.
So apart from your pension fund how else can you invest in the market? I will show you a number of options for investing in the stock market, this is not an exhaustive list but a few easy routes to investments.
Stock Market and Share
Any time you read the financial pages of the newspapers you will find a list or lists of companies and their daily share price. You can select a company, find out the price of the shares, go on-line and purchase them. It is that easy, the hard part is to select the companies that will generate an increasing share price over your expected investment period. The reason I use expected investment period is that you may trade for short term, buy and sell quickly and turn over a profit or you may take a long term view and look to retain the share for many years.
You can also buy shares through an investment vehicle such as a unit trust or for UK residents a tax free ISA. When buying through an investment vehicle you must ensure that the investment risk strategy for the plan meets your investment requirements. If you want to only take a low risk on your investment then ensure that the vehicle you are investing through has a low risk strategy.
Again if you want a high risk investment then look for a high risk investment vehicle. If you believe that the stock market is a solid place to invest and that over the long term you will reap the benefits from the stock market then there are a number of index trackers to look at.
Index trackers are investment vehicles that maintain a portfolio of shares to match the index they are tracking. As an example there are trackers that track the FTSE 100 Share Index. The FTSE 100 contains the shares of the top 100 companies in the UK and an index tracker tracking the FTSE 100 would maintain a balanced portfolio of shares by holding shares across these 100 companies. If you believe the FTSE 100 will increase over a number of years then by investing in a FTSE 100 index tracker you should see the same rate of return on your investment as the FTSE 100 share index. There are many index trackers around so select the index you want to track, find a suitable index tracker investment fund, buy your investment and then hopefully watch your investment grow.
You can also set up monthly investments into the stock market. The benefit of this is that as the market is low you will be buying your shares at a lower price, when the market is high you pay the higher price. By doing monthly investments you are evening out the peaks and troughs of the stock market and is certainly a good long term investment strategy.