Research means learn everything you can about the company or asset you'll be investing in to understand whether or not it will be a good thing to invest in. Obviously you want to your investment to increase in value over time. If you invest over the long term, you're almost guaranteed to make a profit as long as you invest with an understanding of what investments are likely to make money over the long term. A lot of people like to invest in ETFs that track the 500 most valuable companies in that market, and that's usually a good "safe" bet over the long run, but the less risk you take the lower your returns will probably be.
If you're comfortable with more risk, you can research specific companies and consider the various factors that will give you a good idea what their actual value is vs what their stock is valued currently, and whether they are over-valued, under-valued, or valued reasonably, as well as how likely they are to gain in value as a company and over what time frame. There are a lot of variables you can look at and a lot of ways you can analyze them.
If you find something you think is currently undervalued, then it is most likely going to increase in value over time as the market realizes that and adjusts. That would be something to consider investing in. Especially if that company is doing something, providing a service or making something that will continue to solve some problem for a long time, and do so more and more over time. That would tend to mean more and more profits for that company over time, and thus a higher stock price as it becomes more and more desirable and there are fewer and fewer shares available to buy.
You can also invest in stocks that pay dividends, which means that one or more times per year they pay you a piece of their profits according to how many shares you own. You get paid whether the stock price moves up or down, although down probably means you get smaller dividends. Companies that pay higher dividends tend to be unlikely to lose stock value, but may only increase in value slowly. Regardless, you might get paid 25c, 65c, $1 or more per share you own per pay period depending on the pay period, the company and their profits. Higher dividends tend to make the stock more popular, and thus more scarce, meaning the price per share is higher.
But for example, if you were to invest in Company X, and Company X pays a dividend of 42c per share per quarter, then each year you would make 4x42c per share of that company that you own ($1.68). To get a dividend return of $1,000,000 US per year, you would need to own a hair more than 595,238 shares. If that company's shares cost $56.24 each when you want to buy them, then investing in 1,000 shares would cost you $56,240 and get you a dividend of $1,680 per year. Before taxes.
You can also choose to have those dividends re-invested, which creates a very interesting situation known as compound interest. If you bought 1000 shares of Company X and decided to re-invest dividends, then the first quarter, presuming the dividend stays the same, you would automatically be making $420 in dividends, and using it to buy more shares. $420/$56.24 (if the price remains the same - it won't, but for the sake of example) = 7.467 shares of Company X. So after Q1, you would own 1,007.467 shares. In Q2, you would get paid not $420, but $423.13, which would buy you an additional 7.52 shares (presuming the stock price is the same). Then you would own 1014.99 shares, and so on.
Given enough time, you can build a lot of wealth this way, and if you start early enough and continue investing in that company for years or decades, it's not that hard to end up very wealthy indeed as a result - presuming that you pick a good company, they don't die or lose value, and you invest regularly and sufficiently, and re-invest dividends.
Anyone see an error, feel free to correct me, but that's my understanding of it.
If you're comfortable with more risk, you can research specific companies and consider the various factors that will give you a good idea what their actual value is vs what their stock is valued currently, and whether they are over-valued, under-valued, or valued reasonably, as well as how likely they are to gain in value as a company and over what time frame. There are a lot of variables you can look at and a lot of ways you can analyze them.
If you find something you think is currently undervalued, then it is most likely going to increase in value over time as the market realizes that and adjusts. That would be something to consider investing in. Especially if that company is doing something, providing a service or making something that will continue to solve some problem for a long time, and do so more and more over time. That would tend to mean more and more profits for that company over time, and thus a higher stock price as it becomes more and more desirable and there are fewer and fewer shares available to buy.
You can also invest in stocks that pay dividends, which means that one or more times per year they pay you a piece of their profits according to how many shares you own. You get paid whether the stock price moves up or down, although down probably means you get smaller dividends. Companies that pay higher dividends tend to be unlikely to lose stock value, but may only increase in value slowly. Regardless, you might get paid 25c, 65c, $1 or more per share you own per pay period depending on the pay period, the company and their profits. Higher dividends tend to make the stock more popular, and thus more scarce, meaning the price per share is higher.
But for example, if you were to invest in Company X, and Company X pays a dividend of 42c per share per quarter, then each year you would make 4x42c per share of that company that you own ($1.68). To get a dividend return of $1,000,000 US per year, you would need to own a hair more than 595,238 shares. If that company's shares cost $56.24 each when you want to buy them, then investing in 1,000 shares would cost you $56,240 and get you a dividend of $1,680 per year. Before taxes.
You can also choose to have those dividends re-invested, which creates a very interesting situation known as compound interest. If you bought 1000 shares of Company X and decided to re-invest dividends, then the first quarter, presuming the dividend stays the same, you would automatically be making $420 in dividends, and using it to buy more shares. $420/$56.24 (if the price remains the same - it won't, but for the sake of example) = 7.467 shares of Company X. So after Q1, you would own 1,007.467 shares. In Q2, you would get paid not $420, but $423.13, which would buy you an additional 7.52 shares (presuming the stock price is the same). Then you would own 1014.99 shares, and so on.
Given enough time, you can build a lot of wealth this way, and if you start early enough and continue investing in that company for years or decades, it's not that hard to end up very wealthy indeed as a result - presuming that you pick a good company, they don't die or lose value, and you invest regularly and sufficiently, and re-invest dividends.
Anyone see an error, feel free to correct me, but that's my understanding of it.
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The scientist has a question to find an answer for. The pseudo-scientist has an answer to find a question for. ~ "Failure is the path of least persistence." - Chinese Fortune Cookie ~ Logic left. Emotion right. But thinking, straight ahead. ~ Sperate supra omnia in valorem. (The value of trust is above all else.) ~ Meowsomeness!
The scientist has a question to find an answer for. The pseudo-scientist has an answer to find a question for. ~ "Failure is the path of least persistence." - Chinese Fortune Cookie ~ Logic left. Emotion right. But thinking, straight ahead. ~ Sperate supra omnia in valorem. (The value of trust is above all else.) ~ Meowsomeness!
