What is the Process of Buying a Share?
“Given a 10% chance of a 100 times payoff, you should take that bet every time.”
— Jeff Bezos
Buying a share seems easy enough right?
It is, actually. If you play your cards right you can get double and triple times the payoff. How do you do this?
There are a few ways on how you can do this – one is investing in the share market. For this to happen, you will need to invest some money in promising Nepalese companies.
However, if you plan and execute things correctly, you can very well see 10 or even 100 times the return on your investment. It could take a while for your shares in Nepal to be delivered. However, the wait is well worth it.
Table of Contents
What is a Share
Shares, for those of you unfamiliar with them, are equal parts of a company, which gives shareholders the right, through ownership, to participate in the company’s properties.
Simply put, a share is a part of a company you invest in, which makes you an investor and the company has to pay you a portion of the profits they generate.
What are the Pros and cons to Buy a Share?
In a way, investing is like gambling, but with greater control. The more you know and have the expertise regarding the share market, the better the chances you will get after buying the share. While that might sound preferable, it is also true that if you go into your investment unprepared, then you will be more likely to lose money than to earn it.
In addition to the benefits of buying shares, there are also some drawbacks. Keep reading.
Benefits of Buying a Share
Investing in shares has three main benefits.
It is possible to earn a hefty sum over the long haul
Secondly, once you invest in a share, you will passively generate income as long the company generates profit
Thirdly, it is the ease with which stocks can be bought and sold
Long Term Growth of Capital
A long-term investment in shares has a good chance of producing a good return.
The company will continue to pay dividends as long as it keeps growing and earning profits. While the immediate dividend may not be much, as the value of the company increases, so will the value of the dividend provided by the company.
You should note, however, that not all companies might generate profit. So, be careful when buying a share.
Yes, money flows in regular intervals without you putting much of any effort.
We hinted in the previous point that the company will keep on paying dividends as long as it is profitable. Each year you will get a dividend, but you can redirect the funds to your bank account and let the money accumulate there.
Ease of Buy and Sell
Stocks can be bought and sold very easily and in a straightforward manner
It is relatively simple to purchase and sell shares, even though they are technically investments. You only need to create an account, verify your identity, and start trading the shares. Buying a share is that easy.
Drawbacks of investing in a Share
The share market also has its own sets of drawbacks as well. One of the major drawbacks of shares is the instability of the share market.
The stock market fluctuates because the individual stocks that make up the stock market fluctuate
The stock market of the shares you invest in can fluctuate wildly and the value of your share can rise or drop-down at any time. In other words, before selling shares, you should study the market and buy shares of companies with relatively stable stock markets.
Loss of money
The stock market can crash whenever
While there is a relatively low chance of losing all the money, it is never nil. In the event that the company whose shares you own experiences a loss, you will either gain little or none of what you invested. You have a good chance of gaining money, but at the same time, you stand a good chance of losing money as well. Be careful and smart when buying a share.
Timing your investment is one of the keys to gaining profit
This is not necessarily a risk when it comes to shares of the market that have been public for a long time. The thing is, the share market tends to follow a pattern of rises and drops where the value of the share you own rises and falls as well.
Obviously, if you sell the share at a time when its value is falling, then you will suffer heavy losses. So in order to avoid experiencing this, you need to know what the patterns are and when the best times are to purchase and sell the shares.
However, the patterns might not be available to businesses that have not been in the share market for a long period of time. Timing becomes an issue when buying a share as well as selling it.
What is the process of Buying a Share?
What is the process of Buying a Share?
Buying a share is a rather straightforward process. In other words, it’s not about buying a share, but about the knowledge, you should have beforehand.
When buying a Share you need to:
Select a Broker
A professional trader buying a share and selling it on behalf of clients.
A stockbroker is a middleman who connects you to a company whose shares are on sale. While you can buy directly from the company, since the broker has close ties with the company, using them is a better option. At the same time, you will also have to pay them some money as a commission.
Research about the Shares you want to buy
Buying a Share is all about determining the price.
Make sure you research everything you can about the company whose shares you want to buy. Past performance may not be a direct indicator of future performance, but it’s a good guide. Investing in a company is only worthwhile if it performs well. Implying, investing in a company that has been facing losses in the past will not be a wise move.
Decide on the number of shares you want to buy
The numbers of companies listed on the Nepal Stock Exchange are 226 numbers
It comes down to investing heavily and risking losing everything or investing small and never gaining anything significant. If you are new to buying a share and selling it., it would be a good strategy to buy a small number of shares and get some experience on how it is done.
In contrast, if you grasp the fundamentals of the share market and find a company that has consistently turned a profit for a long time with realistic prospects-something that is very difficult to come by-you can invest widely.
Bid on the stocks
The bid represents the highest price someone is willing to pay for a share.
Once all these have been completed, you can bid on the stocks. Shares are released to the public in limited quantities and all you have to do is bid on the number you want and hope you’re successful. There will be numerous factors that determine the outcome of your bid and it will often be completely random.
Therefore, lady luck will play a part in this. Assuming you are successful in getting the shares, you will be ready to play the stock market.
In terms of buying a share, both the physical transaction and the online purchases follow a similar process. The only thing you need to do is replace the physical brokers with online agencies and conduct the bidding online.
Let us point out before we proceed that if you do not understand what you are doing, do not invest large amounts of money directly in the stock market.
Buying and selling of shares is a complicated market that is high risk as well as high reward. It is for this reason that the stock market is sometimes called the game of stocks.
If you are interested in buying and selling shares, we suggest you test the waters by bidding for a small number of shares, gain experience and knowledge, and then start investing a large amount.
Hope that this was helpful for you. If you have any suggestions, do let us know them down in the comments below. And as always, thank you for reading till the end.