Invest in Stocks for Active Income and Passive Income

Invest in Stocks – Active and Passive Income

Today the stock market is the most democratic investment ground. Everyone can invest in stocks, but only a very rich person – the one who “makes” this market, or a very careful one can earn. The rest, sooner or later, leave their money to these two categories of players.

Today exchange trading has become more accessible, it is quite possible to learn how to trade, but in the ocean of advertising and recommendations, a too active reminder of losses is considered “bad form”. Yes, investing in shares of enterprises and working on the stock exchange really give a considerable profit, but such activities are fraught with significant risks. Let us remind you how you can make money on promotions.

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Passive investment in stocks

We buy shares with the expectation of receiving dividends and in the long term – for an increase in market value. Such investments can be called passive rather conditionally, even a small shareholder must constantly monitor the situation.

The main risks are associated with the correct assessment and development prospects of a particular company: it is necessary to analyze the financial statements, process, results, and risks of activities, quality of management, the investment strategy of the company (or fund), taking into account the current legislative regulation. In this regard, investing in shares of foreign companies can be more dangerous due to a lack or misunderstanding of the necessary information.

It is imperative to study the conditions for receiving dividends, as well as the mechanism for the reverse sale of such shares in a situation where you want to return your capital: buyback of shares by a company or sale on an exchange on your behalf.

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Active investments in stocks

It is assumed that the stock will be used as an ordinary trading asset, that is, for speculation on the price difference. Risks are the same as for normal market buying or selling. But there are a few differences.

• Do not trust too much technical analysis, for all stocks, including as part of stock indices, fundamental information is a priority;
• The main method of risk mitigation for a market speculator is the issuer’s financial statements (risks, “quality” and capital structure, the composition of investors, issue of shares, etc.), as well as any corporate information;
• Stock assets are the first to react to any force majeure – economic, political, technological, natural, and sometimes much stronger on the local than on the global one.

The speculator must develop a “flair” for investments in undervalued stocks, which are ready for rapid growth, and stocks with unreasonably high value, with a high risk of sharply depreciating. In addition to stocks, a speculator on the open market also has access to domestic and foreign loans, treasury bonds, savings certificates – for a competent and reasonable investor, there is much more opportunity to earn much more.

Investments in shares of several companies, especially from various industries, significantly reduce the risk of losses, but if there is no personal experience of efficiently working with an investment portfolio, then it would be wiser to transfer the blocks of shares to trust management. Decide on your goals and choose stocks as a normal market product: size, period and mechanism of making a profit, the level of risk you accept. If you are not ready to trade on your own, then it is more profitable to make direct investments in stocks in the form of an investment fund (ETF). Investments in company shares, of course – with a correct assessment of all risk factors, will be safer for you than, for example, a bank deposit – this has been proven by world practice.

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