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February 23, 2021

People Must Know These 5 Basic Knowledge Before Investing In Stocks

Stock investing has risks but also has good opportunities, so before choosing an investment we need to know the principles and basics of analysis about invest in stocks. Additionally, you can also go to alphabetastock.com if you need to find more knowledge regarding stock investment.

Before we jump in and do invest in stocks, it’s best to know and understand 5 (five) basic knowledge that must be understood in stock investing, namely:

# 1. There is a trade-off between the risk and return of investing in stocks

# 2. Diversify stock investment

# 3. The return on the real stock investment is important.

# 4. Stock investment risk depends on the time you have the investment.

# 5. There is no guarantee that the past will repeat itself in the future in stock investing

After we know the five things mentioned above, our mindset will be awakened and then implemented in attitudes and actions in invest in stocks.

The level of risk and return is an endless interesting discussion. Invest in stocks is no exception. The relationship between risk and return is an important concept and has a major impact on corporate managers and investors. So we need a correct and precise stock investment strategy.

The main focus of company managers is to increase company value which can be seen from the increase in share prices, and the risk of each relevant physical asset must be measured based on its effect on the investor’s assessment of share risk.

To make it easier to understand the relationship between opportunities and invest in stocks, I present an example of a case study. Consider an example of the relationship between the level of investment risk and investment benefits:

For example, Goodyear, a tire company, is considering an important investment in a new product, the retread tire. Sales of retread tires, or in other words profits from new operations, are uncertain. So, when viewed independently, the new venture is quite risky. However, if the retread business returns have a negative correlation with Goodyear’s other operations.

On the other hand, when the economy is good and many people have lots of money. They tend to buy new cars with new tires.