Let’s know the application, benefits, risks, and how stock investment works!
Stock investing is a sort of investment that both teenagers and parents are interested in. This strategy not only delivers financial benefits to investors, but it also provides earnings for businesses to run their operations.
We will explain the definition, application, profit and loss, and the best strategy to invest in stocks to reduce risk in this article. So, what exactly are you waiting for? Let’s see what happens!
Table of Contents
What is Stock Investment?
A stock investment is a financial investment made by a person or a corporate entity that gives them a claim on the company’s assets and income, as well as the right to attend the General Meeting of Shareholders (GMS).
The profits received by stock investors are typically in the form of a return on the initial cash deposited, as well as the business’s economic improvement. As a result, the company’s performance will have an impact on investors’ profits and losses.
Difference between Investing and Trading Stocks
Although often equated with trading, the two are different. The difference between investing and trading stocks is as follows.
- Stock trading period is usually shorter
- The purpose of stock investment is to gain long-term profits from the management of the company, while trading aims to generate profits through buying and selling shares.
- Investors will get facilities in the form of dividends, bonuses, and stock splits, while traders will not.
How Stock Investment Works
One of the drawbacks of stock investment is the high risk. This corresponds to the size of the potential earnings if the firm succeeds. As a result, learning how this instrument works is critical in order to reduce losses.
When you invest, you become a part-owner of the business. For example, there are 10,000 shares available to the general public. You hold 10% of the shares if you have a thousand.
After that, the funds will be used by the company to manage the business. Well, this is where the source of profit for investors comes from. The benefits that you can get from investing in stocks are in the form of capital gains and dividends.
Capital gain is the profit from the difference between the selling and buying prices of shares due to market fluctuations. Meanwhile, dividend is the distribution of profit according to the quantity of share ownership. Both nominal always fluctuate depending on the company’s financial condition.
Stock Investment Purpose
Everyone’s goals when investing in companies are usually different according to the targets they want to achieve. Well, the purpose of stock investment is as follows.
- To develop assets because the capital we deposit will be managed by the company so that it is possible to continue to grow.
- Setting up funds for a specific purpose in the future.
- Looking for long term income.
- Business development capital.
Types of Stock Investment
Stock investment kinds are classified according to a company’s business sector. At least 711 companies have registered their shares with the Indonesia Stock Exchange thus far. They are split into 9 categories in general.
- Chemicals and Basic Industry
- Miscellaneous industry
- Property, real estate, and building construction
- Consumer goods industry
- Infrastructure, utility, and transportation
- Trade, service, and investment
Additionally, there are two types of stock investments: ordinary and preferred. You will own the corporation listed in the securities if you purchase common shares.
Preferred stock investments provide the holder with a higher priority in dividend distribution. You also have the option of obtaining rights over the establishment of the company’s policies.
Best Stock Investment App
The best way to manage stock investments is to utilize an app that has been approved by the OJK (Financial Services Authority). What exactly is it? Here is the complete list. this for Indonesia
For those of you who are investing for the first time, then Seeds is one way of investing in stocks for beginners. In addition to providing a risk profile checking feature, Investors can invest starting from a small amount, which is IDR 100 thousand.In addition, Bibit provides a choice of other investment instruments in the form of money markets and bonds. This application is also supported by an e-wallet service so that it is more practical to use.
The next application for stock investment is Magic. In addition to providing many types of investment instruments, the security is guaranteed by the OJK, and the user interface is easy to understand.
If you want to trade as well as discuss and analyze simultaneously, then the most trusted application for stock investment is Stockbit . One of the advantages is that there is a virtual trading feature for learning and buying and selling shares.
The last recommendation for stock investment applications is Bareksa. In addition to being supervised by the OJK, there are more than 150 mutual fund products, both conventional and sharia that can be operated online so that they are easy to use.
Stock Investment Benefits
Stock investing is one of the investment options that offers a sufficient return. The following are some additional benefits for investors.
Can Be Executed Flexibly The
convenience that you will get through stock investment is that operations can be carried out online, from buying to selling so that it will not interfere with the main work.
Potential Capital Gain
The benefit of stock investment is the potential capital gain in the form of profit from the difference between the selling price and the purchase price. Usually, the more funds invested, the greater the potential capital gain that can be obtained.
The next advantage of investing in stocks is that investors will receive dividends, namely profits according to the amount of capital invested.
Stock Investment Risk
Stock investments come with hazards in addition to the potential for significant returns. One of them is the risk of losing money owing to extremely volatile market fluctuations, which means the selling price can drop at any time.
Another risk of investing in stocks is that the firm will go bankrupt and have to be liquidated as a result of a court decision. Common investors will only obtain the balance of the company’s assets after all of their debts have been paid off. Unless you have a preferred creditor title.
Another danger is that the firm will be delisted or withdrawn from the stock exchange by the IDX, forcing investors to sell all of their shares regardless of the selling price.