• Christmas time is near. ‘Tis the season to be jolly and to overindulge in food, drinks and spending. Wouldn’t it be wiser though to maximize your hard-earned cash?  
  • Investing in stocks is the right way to make the most of your money. Also known as shares or equity, by purchasing stocks you buy a small piece of that company and become a shareholder, you can exercise your right to vote in shareholder meetings, while you are eligible to receive dividends if applicable. 
  • Offering many advantages, investing in stocks can help you be a step ahead of inflation, make the most of a growing economy and increase your money.  
  • Looking to invest in stocks this Christmas? Get started today with Calamatta Cuschieri and our team of expert investment advisors. 

As the Christmas Season is fast approaching, young and old are eagerly awaiting for intimate gatherings with family and friends and in partaking in the giving and receiving of presents. Whether it is an envelope with cash from your grandparents or a Christmas bonus for doing exceptionally well at work, you might be wondering what to do with this additional money. But whereas splurging on yourself or your loved ones may be enticing, more often than not, the exorbitant cost of the item purchased is not always equivalent in value to the receiver. Avoid what is known in economics as the deadweight loss by changing things up this festive season and investing that windfall of extra money.   

From serving as another source of income to helping you get rid of your debt, fund your retirement or that family trip around the world, investing can grow your wealth by making your money work for you and grow over time, while by meeting your financial goals, you are ultimately increasing your purchasing power.  

Stocks can set you on the right financial path and secure your future, while if these are purchased for your children, the merits go beyond the obvious monetary rewards. Not only can they be used in the future to fund their studies, pay for their first car or a deposit on a house, but by providing them with the opportunity to be stockholders, you can spark their interest in saving and investing.  

Here we demystify what stocks are and how you can generate high returns.

What are stocks and how do they work?

Also known as shares or equity, stocks are an investment, a means of building your wealth by owning a share in the company that has issued the stock, while for companies, they are a way of either raising money to fund products and other initiatives or to be used for the overall growth of the business and its smooth operation. By purchasing a stock: 

  • You buy a small piece of that company and become a shareholder of that business. Ownership is proportionate to the number of shares owned in comparison to the number of outstanding shares. So if a company has 1000 shares of outstanding stock and you own 100 of these, then your ownership is relative to 10% of the company’s earnings.  
  • Being a stockholder does not make you the corporation’s owner. You simply own the shares issued and as such, you have no power over the company or its assets. 
  • You can exercise your right to vote in shareholder meetings. The more shares you own, the more powerful your voting becomes, so you can indirectly shape the company’s course through appointing its board of directors.  
  • You are eligible to receive dividends if applicable, while you also have the right to sell your shares.

The benefits of investing in stocks

Typically evoking scenes of utter chaos, the stock market is often regarded as the place of massive gains and losses, where investing becomes a gamble. Sure there are risks, however, historically, stocks have shown to surpass and notably outperform in the long run other means of investment, while they can offer real gains to stock investors.  

Stocks can help you:

Make the most of a growing economy – as economic growth creates more job opportunities, income increases boosting consumer demand and creating sales, which, in turn, drive more revenue into companies.

Grow your money thanks to investment gains – although the prices of individual stocks may rise and fall on a daily basis, the stock market tends to rise in value over time. By investing in stable companies that have the potential to grow, maximizes your chances of building your wealth, whereas investing in a variety of stocks can result in profit even if some of your individual stocks lose their value. Placing your money in different types of investment products or in a variety of stocks is known as diversification, which can help weather any losses that may arise in your other investments or specific stocks.

Here is some more information about the importance of diversifying your portfolio.  

Make money in various ways – investing in fast-growing companies that appreciate in value can either help you leverage short-term trends or increase your gains as the company’s earnings and stock price grow overtime. On the other hand, if you are after a regular stream of cash, you may want to purchase stocks of companies that grow at a moderate rate and pay dividends. This type of income can drive you towards achieving certain goals such as funding a retirement plan or investing further. Read through this article to discover more about dividends and how they work.     

Stocks are easy to buy – stocks can be purchased through via a financial advisor, broker and even online through investment apps. All you need to do is simply set up an account and you can instantly purchase stocks within minutes. (a note about choosing the right platform and hint towards choosing ours?)

Stocks are easy to sell – similarly, selling your stocks can be done swiftly through what economists call liquidation. This will allow you to turn your shares into cash quickly with low transaction costs.

Be a step ahead of inflation – ordinary shares have shown to protect against inflation providing enough returns and growth even if the value drops temporarily.

Acquire ownership stake – by buying shares of stock you also gain an ownership stake in the company you have purchased stock in. Although doing so will not place you alongside Tim Cook during a shareholders’ meeting if you’ve bought a stock of Apple, however, you may be able to vote on certain business decisions or corporate board members if you decide to exercise this right. In addition, you will also receive annual reports so that you can learn more about the company and how well it is doing.

Choosing the right stocks for you

From resorting to the internet and an online broker, using one of the myriads of trading apps available to visiting a local full-service brokerage company or buying directly from a company, gone are the days when frantic traders would shout out orders on the floor of major stock exchanges like the likes of the New York Stock Exchange, the Frankfurt Stock Exchange or the London Stock Exchange.

Irrespective of how you will go about purchasing your stocks, ideally you should always consult a financial advisor beforehand while you must ensure that your transactions conform with government regulations which are ultimately put into effect to protect investors from fraud.

Some pointers to consider before nose diving into stock buying.

If the aforementioned benefits have enticed you to take the plunge, there are a number of things to consider before investing in your first stock.

  • Tapping into the basics of the stock market is a crucial step to getting started. Read appropriate books to find the ideal trading technique and take short courses that offer the necessary training you may need to gain a foothold when entering the world of investment.
  • Become more fluent in the language of investing. Understanding what buying and holding, investing and day trading and terms such as market timing strategies mean is a must while, recognising the differences between them is a crucial step to making the right choices.
  • Aim to create a stock portfolio with an assortment of securities from different companies, industries and geographic locations. This diversification can minimise risk, eliminate your chances of being in a vulnerable position and can lead to better investment return.
  • Determine how much risk you can afford to take. Can you purchase riskier stocks or should you stick with stocks of blue-chip companies? do we need to explain blue chip?
  • Keep up with the news and acquire a good grasp of current economic events. Although flicking through the financial section of a newspaper or browsing through finance websites may seem a daunting task, doing so will help you stay on top of the market.
  • Seek help from the experts. Boasting decades of experience, these individuals can offer advice, map out an appropriate investment strategy or plan and help you achieve your investment goals, while avoiding any inevitable losses that may occur to a new and inexperienced investor that has gone it alone.

Here are the right questions to ask before making any investment and some more ways of making money while you sleep.  

Admittedly, gifting your kids or grandchildren stocks might not generate much enthusiasm, while investing your Christmas bonus instead of buying those speakers you have been eyeing for the past few months might be disappointing, however, there are far better ways of making the most of your money.

Investing in the international stock markets since 1972, Calamatta Cuschieri can help you make the right investment thanks to our team of expert financial advisors who can provide stock picks and suggestions to suit a variety of investment strategies. Explore our full range of investment solutions.

BONUS: Here are the 5 blue chip stocks worth reviewing for your portfolio:

Facebook, Inc. (formerly known as Facebook) “FB” provides various products to connect and share through mobile devices, personal computers and other surfaces worldwide. The company’s products include Facebook that enables people to connect, share, discover and communicate with each other on mobile devices and personal computers, Instagram, a community for sharing photos, videos and messages, Messenger, a messaging application for people to connect with friends, family, groups and businesses across platforms and devices, as well as WhatsApp, a messaging application for use by people and businesses to communicate in a private way. 

Apple Inc. “AAPL” designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories worldwide, while it also sells various related services. The company offers iPhone, a line of smartphones, Mac, a line of personal computers, iPad, a line of multi-purpose tablets and a range of wearables, home and accessories comprising of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and other Apple-branded and third-party accessories.

Amazon.com, Inc. “AMZN” operates in the retail sale of consumer products and subscriptions in North America and internationally through three segments, namely North America, International and Amazon Web Services (AWS) segments. It sells merchandise and content purchased for resale from third-party sellers through physical stores and online stores.

Netflix, Inc. “NFLX” provides Internet entertainment services. The company operates in three segments – domestic streaming, international streaming, as well as Domestic DVD. It offers TV series, documentaries and feature films across various genres and languages, while it offers members the ability to receive streaming content through a host of Internet-connected screens, including TVs, digital video players, television set-top boxes and mobile devices. In addition, it provides DVDs-by-mail membership services. 

Alphabet Inc. “GOOG” provides online advertising services in the U.S., Europe, the Middle East, Africa, the Asia-Pacific, Canada and Latin America, while it offers performance and brand advertising services. The company operates through Google and Other Bets segments. The Google segment offers products, such as Ads, Android, Chrome, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure.