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What is a Stock and How to Make a Profit?

Updated: Feb 5, 2023

When it comes to investing in the stock market, the first investment instrument that comes to mind is stocks. It is the name given to the valuable documents given to the shareholders of the equity capital companies to document their shares and partnerships.

In other words, it is also seen as one of the equivalent parts of a company's capital. Stocks also represent an ownership or partnership. Stocks do not have a standard return and their value varies according to the company's balance sheet earnings and investment decisions.

Institutions that can issue stocks are joint stock companies, limited partnership companies whose capital is divided into shares and institutions established by special law.

In short, after you own the stock of a company, you become a shareholder of that company in proportion to the amount of shares you have purchased.

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Things to Know About Stocks

• There is no minimum or maximum limit for stock investment.

• You need to have a good grasp of the factors that affect the stock prices.

• Speculative stocks bring high returns, yes, but they are also high risk stocks.

• You should make sure that you have some investment experience before starting the stock market.

• Instead of a sector you don't know; You should choose the shares that belong to the sectors that you dominate or that you have an opinion on.

• Shares can be easily converted into cash; it is a liquid instrument.


Where to Buy Stocks?

Stocks are usually bought on stock exchanges. To buy stocks on exchanges, you need to work with a brokerage firm. The brokerage house will buy and sell stocks on your behalf and will do all the necessary transactions for you. These institutions can often be banks, brokerage firms or other financial institutions. First of all, after you decide to work with a brokerage house, you can contact them and make your stock purchase.

Investing in Stocks

Stock, which is one of the most used instruments for investing; It is a tool that makes money for investors if it increases in value and is held by investors for a long time.

The logic of investing in stocks; You can decide what you need to do by buying at a low price and being determined.

After getting to know the stock market, it is useful for investors who want to invest in stocks to know this instrument. You should have information about basic topics such as Stocks; As they are affected by the changes in companies and sectors, they are also affected by the country and world economy. For this reason, you should see the stock market as a whole and interpret the prices by considering all developments. By following all the data of the companies to which the stocks belong, you should research the balance sheet data such as profitability, the performances of the companies and their plans and projects for the future. You should monitor the information shared by companies to have an idea about the future of the stock.

You can have information about the future positions of stocks by using technical and fundamental analysis applied in financial markets. Fundamental analysis allows you to analyze the country's economy and sectors, while technical analysis allows you to obtain mathematical results about stocks.

One of the most important points that the investor should focus on is to determine a strategy. You should execute your trades with your own strategies, not with the strategies of other investors. Do not forget that your investment can be successful if the strategy you have determined is in line with your investment and stock expectations.

When you have information about the market and stocks, you will be ready to invest by identifying the instruments you have decided to include in your portfolio and developing your own strategy.

After obtaining all the necessary information to invest in stocks, you can open an investment account through a bank or brokerage firm. The investor, who correctly predicts the fluctuations caused by the decrease and increase in the stock prices, can make a profit by performing the buying and selling transactions at the right times.

Before investing in stocks, you need to know the stock market. For this, too; You should find answers to questions such as what is the stock market, what is it good for, what kind of transactions are made in the stock market, what is the logic of the transactions. Knowing the stock market well helps you to make more profitable investments by evaluating your savings better.

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How Are Stock Prices Determined?

• The most basic factor in determining prices is supply and demand. Buyers and sellers determine stock prices.

• Stock prices are mostly affected by economic developments. Positive economic developments create positive effects, and negative developments create negative effects.

• The company; Company data, such as its financial structure, is a very important issue. It even requires a good follow-up. Because company data also causes prices to change.

• It is also important in which sector the paper company you own operates in. Positive and negative developments within the sector may affect prices.

• When we look generally, factors such as political developments in the country, global events, wars, terrorist threat, natural disasters may affect share prices.

Factors That Reduce Stock Prices

• Increased corporate debt and competition.

• Increase in sales.

• Negative changes in management.

• The increase in raw material prices.

• Lack of capital.

• Negative political and social events in the country.

• Times of crisis.

• Natural disasters.

• Inflation rise.

• Banks' policies.

• Increasing interest rates.

Factors That Raise Stock Prices

• Technological advantages.

• Capital increases with equity.

• The success of the people who manage the companies is directly proportional to the success of the company. Therefore, when management is successful, companies are successful.

• The positive development of the sector situation in which the company is located.

• Since the incentives given to the company by the government will facilitate the growth of the business,

Factors That Raise Stock Prices

• The more positive the economic data in the country, the higher the increase in stock prices.

• Important and major developments regarding the company.

• Expectations formed by investor's trust or distrust are among the factors that determine stock prices.

In line with these data, despite all the factors, it is possible to find stocks that are suitable for each investor's own wishes and portfolio. You can invest in low-risk stocks as well as speculative and high-yielding stocks. When the stock market is mentioned, stocks come to an investor's mind before other investment instruments and have an important place in the history of the stock market.

What are the Advantages of Stocks?

• Stocks are a liquid market. In other words, you can turn your financial assets into cash in the fastest way.

• Stocks, in other words, are a form of ownership. That's why they're so involved in the growth of a company.

• Owning stocks brings with it special rights. For example, you may have valuable rights such as dividend, voting right, priority right, right to information, right to participate in company management and participation in the liquidation balance of the partner company.

• You can become a shareholder of the company with the share right you have in proportion to the number of shares you will receive. At the same time, you can attend board meetings.

• Stocks are a spot market. This means; It is a financial product that you can buy whenever you want and sell in the market whenever you want.

• With the advantage of “short selling” in your stock transactions, you can save money when stocks go down after the stocks are short-sold, thanks to the lending market. The stocks that are replaced after the decline offer you the advantage of profitable trading.


How to Buy Stocks?

There are certain stages that investors who want to buy stocks as an investment tool should follow. These stages are respectively;

• Intermediary institution selection,

• Opening an investment account at a brokerage firm,