Investing is the act of buying a financial asset, owning it outright, with the aim of making a profit from that purchase further down the line. This is the most intuitive way beginners usually think of accessing financial markets.
For example, you have analysed the market and decide to purchase Apple shares in the hopes that the company’s share price will appreciate in future. When investing with a platform like ours, you’ll buy and own that actual financial asset – for instance shares or ETFs.
Because you’re buying these, you’ll have to commit the full value of your position upfront. So, in the case of shares, the current share price for that stock multiplied by the number of shares you want to own.
This can be a significant amount of money to commit upfront. However, that amount also represents the full extent of your risk. With investing, you can only ever lose what you paid for shares in a ‘bad investment’, whereas with trading you can lose (or gain) far more than your initial capital outlay. This often makes investing a longer-term prospect and a less risky one than trading.
Just remember that your capital is still at risk, as the value of shares, ETFs and other investment vehicles can fall as well as rise, which could mean getting back less than you originally put in.
Also, just like buying any other asset, you can only profit if that stock or ETF does well in the financial markets and you sell it for more than you paid for it. Because the price of your investment asset needs to appreciate in value to make a profit, you’re restricted to ‘going long’. When ‘going long’, you believe that the price of an asset will rise over a certain timeframe, so you buy it with the intention of selling it later to earn a profit – ‘buy low, sell high’.
Once you’ve bought shares in a company, you’re also entitled to any dividends they pay out. Just bear in mind that companies are not obligated to do so and usually only pay out generous dividends when they’re especially profitable. Plus, you’ll have shareholder voting rights if you invest in stocks.
You can use our share trading platform to invest in a wide selection of over 13,000 leading stocks and funds.
Just remember that, with all investing, past performance is not a guarantee of future results. Every investment decision should be based on a thorough analysis of market conditions and the prospective investment itself.
