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Investing in Stocks: Quick Guide for Beginners

If you have reached a point in your life when you feel that it’s time to begin investing in stocks to build financial wealth for your future, it can be a daunting prospect. There is so much to learn and at this point, you may not be comfortable simply investing in stocks from corporations you are familiar with. Perhaps that is something that should speak for itself. If the company has been around for decades and has performed well, that may be a clue to a relatively safe investment. However, that alone isn’t enough to simply put your hard-earned savings into the stock market. First you need to understand that there are various types of stocks to invest in.

Begin with Understanding Stocks and Dividend Paying Stocks

Here is something you may want to consider and that would be that there is a very real difference between stocks and dividend paying stocks. You may understand that when you buy into the stock market you will be owning a small percent of the company you are buying stocks from. These grow wealth over time but there are also dividend paying stocks that pay what amounts to a reward on top of the value of the stocks you’ve purchased. In other words, over time if your stocks do well, they will gain in value, but you will not realize that value until you sell your shares. Dividend stocks, on the other hand, have the same growth potential but the board of directors assess a ‘reward’ of sorts to their shareholders that is paid quarterly, on top of the rise in value of the underlying share.

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Calculating Dividend Payments Made Easy

Since it is clear that buying stocks means that you’ve bought a portion of a company, then what about those dividends you will be paid at regular intervals? Each dividend paying stock generally announces the percentage they will be paying but that can be a bit confusing to calculate. Remember, this is an amount over and above the rise in value of the stock. One thing you can do is use an online calculator as an easy way to see the math. Unless you are a Certified Public Accountant, CPA, the math may be a bit tricky. When you are researching various dividend paying stocks, use the calculator to see exactly what that payment has been over time so that you can feel comfortable in buying certain stocks.

Why Dividend Stocks Are a Good Investment for Beginners

When you are new to the market, one thing you will probably focus on is the daily financial page in your local paper or online. You will want to see growth in value, even if there are days when your stocks don’t perform as well. You will look for continual growth over time. That’s as it should be; however, once again it behooves you to understand that high yield dividend stocks also pay an amount above and beyond the gain of that stock as a sort of reward set by the directors. You can use that money to continue reinvesting in the shares of that company so that you have extra growth potential. This is an amazing way to watch your account gain in value because those dividends continue buying more stocks without putting another penny in from your savings. Of course, you will probably want to do that but if you are unable to at any point, the dividends will do the job for you.

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James Musoba
James Musoba
Studying Africa's startup and technology scene. I always look forward to discovering new exciting inventions and vibrant entrepreneurs.

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