Financialtreat – will explain the Definition of Stocks Investment, Benefits of Types, Methods, Advantages and Risks that you will get in the following article. let’s look at this article carefully!
Stocks are becoming an investment that you can choose from in this day and age. But, before that you should be aware of the meaning, types, advantages, and risks of stocks. Well, on this occasion we will discuss about How to Invest in Stocks that you can easily do.
Who doesn’t know stocks? An investment that has been the last few years in Indonesia is on the rise. Investment is used by the people to develop an asset. Asset development can change your life to be more prosperous later. Therefore, first get to know how to invest in good stocks. Among the existing investment models in Indonesia, stock investment is still a popular one.
Definition of Stock Investment, Benefits of Types, Methods, Advantages and Risks
However, to invest in stocks you cannot be careless, especially if you want to develop assets through large amounts of stocks. There are several things that you must know about stock investment first, such as understanding, models, examples, and also the benefits or losses caused by stock investment.
What is Stock Investment?
Quoting from Investopedia, investment is a way for you to set aside some property or money in one of the financial markets with an exclusive time and reap it in the future. Of course, investing in healthy stocks will make your money become profitable. Then, what is a stock? Stock Investment is a financial market instrument in the form of a capital participation of a person or business entity in a company or limited liability company.
With this stock investment, you also have claims on assets, company income, and also have the right to be present at the General Stock Exchange (GMS). Stock goals are also usually used to track earnings or long-term investments. Then, this stock investment is also a company that will manage the assets or capital you deposit, and usually stock investments are used for exclusive purposes in the era that will visit.
In short, the purpose of investment is to generate income. It should be understood that the profit obtained from investments can be in the form of interest, dividends, royalties or rent. Not only that, there are several other benefits of investing, including:
1. Controlling a company
One of the benefits of investing is the value that can be in the form of investment in a company. The existence of partial ownership of equity makes the will of investors taken into account in taking provisions on the company. In some settings, a person invests to maintain or create good interactions between companies.
2. Ensuring the Availability of Standard Materials
Some agencies are deliberately investing in the stAndar material production business with regard to its business. Thus, the agency can ensure the availability of standard materials necessary for the operation of the main enterprise.
3. Meet Future Needs
One of the benefits of investing is to prepare for unexpected needs in the future. The value of assets that tend to rise will be a vehicle for tracking profits that can be disbursed at any time or exchanged for other energy sources when needed.
4. Build a Frugal Lifestyle
Investment activities arise from the spirit of saving for the future. Thus, investors can be better trained to allocate their income to long-term assets rather than falling into consumptive and spontaneous actions. This encourages an economical and debt-free lifestyle.
Types of Stock Investments You Should Know
After understanding what stock investment is, the next step is that you must be clear about the types of stock investments circulating in the money market. Reporting from OCBC Nisp, there are several types of shares that are distinguished from ownership, trading performance, and how to transfer them.
1. Common Stock
Common stock or common stock is a type of stock based on ownership, ordinary shares can be carried out ownership claims by adjusting the losses and profits owned by the company. An example of a common stock or common stock is a warrant stock.
With ordinary shares, shareholders have limited liability. For example, if a company provides bank shares, then the shareholder will only get the last priority in the company’s profit sharing.
2. Preferred Shares
The next stock investment is the investment of preferred stock which is a combination of bonds with ordinary stock investments, therefore the interest generated from the investment of preferred shares will be fixed. Usually, you can also find preferred shares on the Indonesian impact exchange with a code of 4 letters or there is an additional letter ‘P’ behind it.
3. Shares On The Show
Stock investments on these shows are also commonly referred to as bearer stocks, these stock investments also usually do not have a written ownership name. The reason is to be easily transferred without going through a legal entity.
4. Shares in the name of
In accordance with the name, the investment of stock shares on behalf of the designation has written evidence in its ownership. To move or transfer, of course, you have to go through a legal entity.
5. Income Stock
Income stock investments are stocks that usually pay a profit or dividend greater than the previous period. This makes the income stock income always increase in each period.
6. Growth Stock
Growth stock is a stock investment that has a high stock development. But, usually not all high-end companies have growth stock. Growth stock is divided into two, namely Well-Know, the growth stock from the company is quite high. Meanwhile, lesser-known usually comes from growth stock which companies are less popular.
7. Blue Chip Stocks
These stock investments are usually issued by high companies or have a stable income and also continue to pay profit sharing. This type of stock investment is also often targeted by investors.
8. Counter Cyclical Stock
One stock investment that will have no effect on an up-and-down economy is counter cyclical stocks. So that the conditions will always be stable, but the profit of counter cyclical stock corresponds to the company that issued the shares.
9. Speculative Stocks
The most recent stock investment model is speculative stocks that provide profits irregularly, but have high returns.
Advantages of Stock Investment
Indeed, it is stated that this stock investment will be very influential for prosperous finances later. According to the Indonesia Stock Exchange, there are three stock advantages that can be obtained from investors or also those of you who buy shares.
1. Capital Gains
The first advantage of stock investment is capital gains, which is the difference between the selling price and the purchase price. Capital gains also usually come from stock trading activities in the secondary market.
Stock investment also has a special feature in the form of dividends, namely the distribution of profits by the company which of course is also generated by the company itself. This dividend support must obtain approval from shareholders in the AGM.
Dividends given by companies are usually given in cash or also stock dividends. Of course, if it is in the form of cash, it is in the form of an amount of rupiah. Meanwhile, stock dividends will be in the form of shares which will later be added to shares owned by financiers.
3. Can be run anywhere
Investing in stocks can be paid anytime and anywhere. Stocks purchases are also mostly carried out online starting from the sale to the purchase. So it will not interfere with your activities.
Not only advantages, stock investment also has risks that you should avoid:
1. Capital Loss
Unlike capital gains, capital loss is a situation where an investor sells his shares lower than the previous purchase price.
2. Liquidity Risk
Shareholders can get priority at the very end after if the company whose shares are owned is declared a bank by the court. If the company still has residual wealth, it can also be divided in total among all shareholders. However, this claim must be done when the company has carried out its obligations.
In order, you need to keep abreast of the company’s growth from the shares you own. Also keep in mind that stocks circulating in the secondary market will always experience an increase and decrease.
Read more wealth management:
- Want to Become an Investment Banker? Must Know First What is an Investment Banker!
- Know, Understanding Investing of Advantages and Disadvantages
What are the Disparities of Stocks Investing and Stock Trading?
You can often hear about stock investment and stock trading, that is, the first time period of stock trading will be shorter than stock investment, stock trading also has more purpose to make a profit from the number of stock purchases. Meanwhile, stock investment emphasizes more long-term profits.
Most recently, traders who carry out stock trading will not get the advantage of stock investments such as dividends, incentives, and stock splits.
Well, those are some important reviews that discuss how to invest in stocks with this article, hopefully it will be useful and thank you.