Steps to investing in stocks for beginners

Investing in stocks for beginners is one of the things that worries small investors in Saudi Arabia, as the process of trading stocks is somewhat complicated, and involves many losses. In the event that the market movement is not well studied, and in Saudi Arabia, the Tadawul financial market offers the possibility to participate in companies’ subscriptions from time to time.

A guide to investing in stocks for beginners?

At the outset, we explain the meaning of a stock, which is a stock or stock that represents a small ownership in a company. When you buy a share in a company, you own a share in that company. You can own these shares, or combine your money with other people’s money in what are known as investment funds.

Investment funds buy a group of shares managed and selected by the fund manager. If you choose this type of investment, you just need to choose the name of the fund. In the event that you own the shares directly, you have the right to vote on the company’s decisions at the general meeting.

How does the stock market work?

The stock market or the money market involves many losses as well as gains. It is necessary to know how the financial market for stocks works and this is what beginners do not know, and to invest in stocks means to buy and hold it for a period of time to make profits, and the profit is achieved in two ways:

  • The first: If the company achieves growth and becomes valuable, its market value will increase, and consequently the share price will increase, and thus the value of your investments in it will increase.
  • Second, some companies distribute dividends to shareholders each year, called cash dividends. It is considered as a way to achieve stable income.

In the case of owning shares in large and long-term companies, you will get dividends, but without rapid growth in the value of the stock, and dividend shares are good if you plan to invest in the long term and a want to get stable income and not an increase in the share price.
As for small companies, they often provide annual profits to their shareholders, and these companies have better opportunities for growth. Which means more growth opportunities for your capital.

How to invest in the stock market?

You can invest as we explained on two levels, direct individual level or through investment funds:

Buying and selling shares

If you prefer to buy and sell shares directly individually, you will be completely independent and have three options to learn:

  • Either an online financial broker. There are many approved brokers for stock trading.
  • Or a financial broker approved and licensed by international trading bodies.
  • You need an investment manager to buy and sell for you and give you trading and speculation advice.

Investment in mutual funds

It is a method of collective investment, where the investor invests his money with other investors in one investment fund, and it is invested in shares, bonds and other assets. or fund managers.

Risks of investing in the stock market

Buying shares is not without risk, but in the long run it can bring good financial returns. If you want to double your money in a year, then the field of stock trading is not suitable for you, but if you plan to is to double your money over 10-15 years, the stock market is a profitable option in the long run.

equity investment gains

Equities are designed to provide you with two types of returns, either annual income or long-term corporate capital growth. Equities provide income in the form of dividends paid twice a year and can be considered as a bonus to shareholders. It is distributed when the company makes a profit and has liquid funds. The more profitable the company, the more profits will be distributed to the shareholders.

It is possible to invest in equities to achieve a stable income: some companies make large financial profits every year, and a percentage of these profits are distributed to shareholders and therefore offer investors a stable income twice a year. .

Some companies have large investment programs like Saudi Aramco, thus spreading generous profits in the name of income stocks, and there are other companies that are at an early stage of their development and eager for expansion called growth companies. And its shares rise when it succeeds in its investment plans. Long-term capital growth is achieved when the share price rises over a certain period.

Benefits of stock trading

Stock trading offers investors more high value gains based on each investor’s specific goal. The benefits of investing in securities are as follows:

  • This is a great way to save: it’s a great way to save and build wealth in the long run as well as the short run.
  • A way to make money You may not have a large amount of money, nor enough time or the required entrepreneurial skills, so investing in bonds and stocks is suitable for you to achieve a steady steady income.
  • Investing in the stock market is not just about making a profit and making money. It helps you make a difference in your community and support local businesses.

Top Stock Trading Methods for Beginners

Here are the easiest ways to get started with stock trading:

  • First define your investment approach in the sense of knowing what you want from the process of investing in stocks. Are you interested in analysis and approaching numbers so you can track stock indices? There are three ways to determine your investment approach, whether individual stocks, ETFs or robo-advisors.
  • Second, determine the value of the amount you want to invest, provided it represents only 20% of your total investments, invest the money you do not need, and do not borrow before investing.
  • Third, open a trading account. Today, Saudi banks provide trading accounts for trading, including Al Rajhi Capital, through which you can participate in subscriptions and buy and sell shares.
  • Fourth, choose your stocks while making sure you diversify your investment portfolio with a number of suitable stocks, invest in business you only understand, avoid highly volatile stocks and learn the basic criteria and criteria for evaluating stocks.

One of Warren Buffett’s best investment advice is that the best way to invest in stocks is to invest smart, you do not have to make large investments to achieve great results. All you have to do is buy shares in large and reliable companies and stick to those shares as long as the business makes a profit, understands the market movement and its permanent fluctuations and follows the fluctuations in the markets and thus saves your money.

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