Let's know the application, benefits, risks, and how stock investment works!
Stock investment is a type of investment instrument that is in great demand by both teenagers and parents. In addition to providing financial benefits for investors, this method also provides profits for companies to manage their business.
In this article, OCBC will discuss the definition, application, profit and loss, and the correct way to invest in stocks to minimize risk. What are you waiting for? Let's see!
What is Stock Investment?
Stock investment is investment in the form of a certain amount of funds by a person or business entity through which they have a claim on the assets and income of the company and are entitled to attend the General Meeting of Shareholders (GMS).
The profits obtained by shareholders of stock investments are usually in the form of a return on the initial capital deposited along with an increase in the economy of the business. Thus, the company's performance will affect the profit and loss of investors.
Difference between Investing and Trading Stocks
Although often equated with trading, the two are different. The difference between investing and trading stocks is as follows.
Stock trading period is usually shorter
The purpose of stock investment is to gain long-term profits from the management of the company, while trading aims to generate profits through buying and selling shares.
Investors will get facilities in the form of dividends, bonuses, and stock splits, while traders will not.
How Stock Investment Works
One of the disadvantages of investing in stocks is the high risk. This is in line with the magnitude of the potential profit if the business is successful. Therefore, it is important for you to learn how this instrument works in order to minimize losses.
When you invest, you are the owner of a part of the company. For example, there are 10 thousand shares open to the public. If you have as many as one thousand, then you are the owner of 10% of the shares.
After that, the funds will be used by the company to manage the business. Well, this is where the source of profit for investors comes from. The benefits that you can get from investing in stocks are in the form of capital gains and dividends.
Capital gain is the profit from the difference between the selling and buying prices of shares due to market fluctuations. Meanwhile, dividend is the distribution of profit according to the quantity of share ownership. Both nominal always fluctuate depending on the company's financial condition.
Stock Investment Purpose
Everyone's goals when investing in companies are usually different according to the targets they want to achieve. Well, the purpose of stock investment is as follows.
To develop assets because the capital we deposit will be managed by the company so that it is possible to continue to grow.
Setting up funds for a specific purpose in the future.
Looking for long term income.
Business development capital.
Types of Stock Investment
The division of stock investment types is based on the business sector of a business entity. So far, the Indonesia Stock Exchange has recorded at least 711 companies that have registered their shares. In general, they are divided into 9 sectors as follows.
Chemicals and Basic Industry
Property, real estate, and building construction
Consumer goods industry
Infrastructure, utilities, and transportation
Trade, service, and investment
In addition, the type of stock investment is divided into ordinary and preferred categories. In common stock, you will hold ownership of the company stated in the securities.
Preferred stock investments give the holder a priority position in terms of dividend distribution. In addition, you also have the opportunity to get rights regarding the determination of the company's policies.
Best Stock Investment App
The way to run stock investments is to use an application that has received permission from the OJK. What is it? Here is the list.
For those of you who are investing for the first time, Seeds is one way of investing in stocks for beginners. In addition to providing a risk profile checking feature, investors can invest starting from a small amount, which is IDR 100 thousand.
In addition, Bibit provides a choice of other investment instruments in the form of money markets and bonds. This application is also supported by an e-wallet service so that it is more practical to use.
The next application for stock investment is Magic. In addition to providing many types of investment instruments, their security has been guaranteed by the OJK, and the user interface is easy to understand.
If you want to trade as well as discuss and analyze simultaneously, then the most trusted application for stock investment is Stockbit. One of the advantages is that there is a virtual trading feature for learning and buying and selling shares.
The last recommendation for stock investment applications is Bareksa. In addition to being supervised by the OJK, there are more than 150 mutual fund products, both conventional and sharia that can be operated online so that they are easy to use.
Stock Investment Benefits
Stock investment is one of the investment activities that promise a high enough return. Some other advantages for investors are as follows.
1. Flexible Executable
The convenience that you will get through stock investment is that operations can be carried out online, from buying to selling so that it will not interfere with the main work.
2. Potential Capital Gain
The benefit of investing in stocks is the potential for capital gains in the form of profits from the difference between the selling price and the purchase price. Usually, the more funds invested, the greater the potential capital gain that can be obtained.
3. Stock Dividend
The next advantage of investing in shares is that investors will receive dividends, namely profits according to the amount of capital invested.
Stock Investment Risk
In addition to providing the potential for large profits, stock investments also have risks. One of them is the potential for losses due to very volatile movements so that the selling price can decline at any time.
Another risk of investing in shares will arise when the company goes bankrupt according to a court decision and must be liquidated. When that happens, common stockholders will only get the rest of the company's assets after all of their obligations are paid off. Unless you hold the title as a preferred creditor.
In addition, another risk is when the company is delisted or removed from the stock exchange by the IDX so that investors have to sell all their shares regardless even though the selling value is falling.
From the description above, it can be concluded that stock investment is a type of instrument that promises a high return but the risk is also quite large. Thus, you should consider the purpose, the way it works, and make wise judgments when using it. Good luck!