Top Stocks to Buy Now for Newbie’s in Stock Market Trading

The first step in successful stock market investing is to understand the stock market. This is a very crucial step in your investing journey. If you begin investing in the stock market with a thorough or at least a good understanding of the stock exchange itself; you may suffer losses at the beginning. These first reductions may discourage you from lifelong from job stock market investments. So, it is highly important that you begin your journey being fully ready.

A stock market is basically a market to buy and sell stocks of the companies. It refers collectively to all of the stock exchanges, where the issuing and trading of stocks take place. The stock trading could be done on the correct exchange platform or in an over-the-counter market. The stock market is also referred to as the equity market. The stock exchange provides a company with a mechanism to get capital from investors instead of partial or fractional ownership.

The stock exchange has two main parts viz. primary market and secondary market. The new issues of the stocks are sold in the primary market by the company going public. The subsequent buying and selling of the stock, after it's been recorded and marketed by the company, takes place in the secondary sector.

Stock Exchanges Today:

Stock exchanges have been established in most major financial Centers and cities throughout the world such as New York, London, Hong Kong, Singapore, Tokyo, etc..

New York Stock Exchange (NYSE) and the NASDAQ will be both the largest stock exchanges in America. NYSE was founded in 1792. NYSE is the biggest stock exchange in the world in terms of market capitalization.

Stock Exchange Risks:

There are a number of dangers associated with stock market investing. The volatility of stock prices is one of the most important risks associated with investing in stocks. The rise and decline in the price of stock even by 20% in a day, is not a matter of surprise.

Sometimes, there’s a widespread decline or drop in the Costs of almost all the stocks. This situation is referred to as a stock exchange crash and is very painful to the stockholders. In the event of a stock exchange crash, the investors may not find any buyers for many of the stocks they hold.

Regulators of the Stock Markets:

The governments of various countries have established Regulators to monitor the activities of the stock exchanges with an aim to protect investors.

In America, the Securities and Exchange Commission (SEC) is The main regulator that monitors the U.S. stock markets. The SEC summarizes that its mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."

Stock Market Functionaries and Players:

The stock market has a number of functionaries and players. They are stockbrokers, traders, portfolio managers, stock analysts, and investment bankers. They have distinct roles to play but are interrelated.

Stockbrokers buy and sell securities on behalf of the investors. Portfolio managers look after and manage the investments or stocks for their clients. Stock analysts research the stocks and rate them for buying and selling. Investment bankers work for the companies for their IPOs, mergers, and acquisitions, etc.

Top Stocks to BuyNow

One of the safer methods of investing in stocks is investing in mutual funds. Mutual funds invest in stocks also; however they pool the investible funds of a large number of investors, and then invest that collective pool of funds on the respective stocks. If there is any loss in one particular stock; its spread over a large number of investors and consequently, the reduction to an individual investor is quite bearable. This is simply because of the large magnitude of the total funds. Therein dwells the beauty of investing in stocks through mutual funds.

The benefit of diversification, which is not available to some Small investor in pure stock investing, becomes available to the smallest individual investor due to mutual funds. The mutual fund companies, also known as asset management companies, employ professionally qualified and experienced persons to manage the investments. Their expertise and professional approach to stock investing functions the tiny investors very well, thus, mutual funds are an effective, efficient, and less risky way to invest in the stocks. However, mutual funds aren't a totally risk-free way of investing. Mutual funds also include various fees and expenses. The investor must bear them ultimately.

Benefits of Mutual Funds:

Diversification: Mutual funds have well-diversified portfolios. They have a high number of stocks of numerous companies across many industries. This helps them in bearing the risk due to a sudden or big loss caused by a specific stock or industry. By spreading the investments throughout the spectrum of shares, companies, or industries, you can protect your investments in the times of wide swings or market changes. Mutual funds are a real-life application of an age-old maxim"Don't put all your eggs in one basket".

Variety: The mutual funds, particularly the large and well established mutual funds, have an enormous quantity of money for investing and this means they are able to invest in an array of assets and asset classes. For example, some mutual funds may invest in a mix of large caps and mid-caps. The large caps give stability to the portfolio; while mid-caps offer the growth potential.

Affordability: If investors want to build a well-diversified portfolio, they will require an enormous amount to invest. But, a small investor may also invest in a well-diversified portfolio via a mutual fund by investing amount of money that's affordable.

Dividend: You can find some regular income through the dividend declared and distributed by the mutual fund.

Liquidity: You can also redeem your mutual fund portfolio in the net asset value (NAV).

Professional Expertise: Mutual funds are managed by people with a lot of financial expertise and experience. This makes it easier for you to reap the benefits of smart investments.

Disadvantages of Mutual Funds:

Costs: You have to bear ultimately all of the expenses, fees, and charges related to the operations of the mutual fund or the asset management company. This reduces the value of your mutual fund portfolio or the net asset value (NAV) in addition to the returns. You have to bear these costs even if the performance of the mutual fund is adverse i.e. you have made losses together with the decrease in the entire value of your mutual fund portfolio.

Risk of Loss: You have all of the risks related to stock investing when you invest in a mutual fund. You may lose a part or all of your money in mutual fund investment in case of market volatility.

Performance: Though the mutual funds have a past performance and track record, it doesn't be certain that the future performance would be outstanding.

Limited Potential: When markets are on the move with high growth in selected stocks or businesses, you may not gain the whole profit potential of investing in those specific stocks or industries. This is because your investments have a diversified mutual fund.

Lack of Guarantee: The mutual fund investments aren't guaranteed by the government or by any other government agency such as the guarantee you have to your deposits in the bank in many countries e.g. guarantee of Federal Deposit Insurance Corporation (FDIC) in the US.

You can decide on whether or not to invest your money in mutual Funds following the advantages and drawbacks of the mutual funds in your individual case, taking into account your investment objectives, size of the portfolio, risk appetite, etc..

There are various types of mutual funds in which you can invest. Mutual funds have three main categories viz. stock funds or equity funds, bond funds, and money market funds. Each category of mutual funds has its own distinct attributes, returns, and risks. Higher the return potential, the greater is the risk of loss.

There are some limitations imposed on the mutual fund with respect to where and how much it can invest in different types of stocks or assets based on its category. But these rules vary from country to country. In a few countries, there are rules that require a mutual fund to invest at least 80% assets in the type of investments belonging to its declared category. You may be aware of the exact type of investments from the mutual fund prospectus.

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Money Market Mutual Funds: These are funds that invest in short-term Investments or securities issued by the authorities, or top-level creditworthy corporate. They are less volatile when compared with the other types of mutual funds. But, they have low yields also. The returns usually move in tandem with the short-term interest prices. They offer a good alternative to keeping your money in cash in a bank account, as they provide you high liquidity and you can take out your money very quickly.

Bond Mutual Funds: These are funds that invest in the bonds issued by the government and companies. They have higher risks when compared with money market funds, but less risk in comparison with the stock or equity funds. Most of the bond funds concentrate on higher yields. The bond fund's earnings after expenses are referred to as bond yield, which mainly depends upon bond quality and maturity.

These funds mainly face credit risk i.e. the danger that the counterparty viz. Bond issuing authorities entity or the company may fail to pay the coupon/interest or the principal amount. The credit risk depends upon credit the quality of the bonds contained in the fund portfolio. These funds also face interest rate risk and usually, the market value of the bond capital goes down when interest rates rise, particularly in case of longer term-bonds. Usually, the lower the quality or the longer the maturity of bond; the higher is the yield and risk.

Stock or Equity Mutual Funds: These funds invest in the shares of various companies. They have higher risks as compared to a money market or bond funds. They also have high volatility. But, the stock or equity mutual funds have performed much better than other investments over the long term historically.

These funds mainly face the market risk the prices of stocks may fluctuate considerably. The costs may fluctuate due to many reasons, e.g. changes in the general economy, industry level happenings, individual company or stock level developments associated with sales, input costs, management, etc..

Stock or Equity Mutual Funds is a broad degree category and include many sub-categories of mutual funds in it, such as:

Growth Funds: focus on stocks with high growth potential.

Income Funds: concentrate on stocks paying regular dividends.

Sector Funds: focus on a particular industry or sector e.g. IT, telecom, etc..

Index Funds: focus on a portfolio of shares replicating an Index to achieve the exact same return, e.g. S&P 500.

Balanced Funds: concentrate on a portfolio with an optimum combination of both the stocks and bonds.

Buying and Selling of Mutual Funds

You may buy the stocks of mutual funds in a number of ways. The most common way is either buying from the fund itself or buying via a financial adviser.

The price for mutual fund stocks is usually calculated on the basis of the per stock net asset value (NAV) of the mutual fund. Based on a mutual fund, there may be a stockholder fee levied at the time of buying such as sales load. The NAV of a mutual fund is calculated at the end of the particular business day by dividing the total value of the holdings of the mutual fund after deduction of expenses, by the total number of shares owned by the mutual fund. Buyers of mutual funds buy at the NAV calculated after they place the buying order.

The stocks of mutual funds are redeemable i.e. the investor can sell the stocks back to the mutual fund at any point in time.

All said and done, mutual fund investing is a great and fantastic way to invest in the stocks. There are a number of mutual funds with wide-ranging characteristics, different types of portfolios, and investment philosophies. You may choose the one which best fits your unique needs and circumstances in terms of return objectives, risk tolerance, liquidity needs, etc..

It will give you a good opportunity to learn about inventory investing if you continuously track the performance of your mutual fund portfolio and how it moves with the total stock markets as well as with the peer group of mutual funds.

Thus, you will start recognizing a pattern of price movements In the stocks with relation to the financial environment, the performance of the industries and businesses, earnings, results of organizations, etc.. After a time, when you become well versed with all these stock investment related things, you may decide to take a plunge in the wide sea of stock investing on your own; and come out with flying colors.