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When it comes to investing in the stock market, the most common investments are common stocks. Common stocks represent ownership in a company and sometimes give investors the opportunity to share in its profit and growth. Deciding on which common stock to invest in can be very difficult, as there are thousands of companies listed on the stock exchanges around the world. Some stocks tend to have stable performance, while others tend to be more volatile: the differentiation between stability and volatility is made by analysts who analyze historical data, and this has to do with prices and returns. Nevertheless, these assumptions don’t always hold true, and traders and investors should consider each case separately.
There are several factors to consider when evaluating common stocks, and it is necessary to have a solid understanding of the company’s products and services. In this article, We will take a look at some of the best common stocks to invest in, factors to consider when choosing a common stock, and where you can easily buy these stocks. Let’s dive in
- 1 What are Common Stocks?
- 2 TOP 5 Common Stocks
- 3 Understanding the Common Stock Market
- 4 Key factors to consider when choosing common stocks
- 5 How to Invest in Common Stocks
- 6 Conclusion
What are Common Stocks?
Common stocks are a type of security that represents ownership in a publicly traded company. When someone buys common stock, they become part of the owners of the company, and they now have the right to vote on important matters.
Common stocks are different from other types of securities, such as preferred stocks. They’re considered relatively riskier than other stocks, this is because common stockholders are at the bottom of the corporate hierarchy, and they are only entitled to a fraction of the company’s revenue after every other obligation has been met.
There are two major types of common stocks: growth stocks and value stocks. Growth stocks are companies that are expected to grow at a faster rate than the general market because they often operate in emerging industries and have innovative products and services. Value stocks are companies that are considered undervalued by the market, they often have experienced a temporary setback. Even if these stocks usually offer relatively higher dividends when compared to growth stocks, this is not a guarantee of income.
TOP 5 Common Stocks
A frequent strategy used by people to gradually increase their wealth is to invest in common stocks. Yet with so many companies to pick from, it can be difficult to know which ones are worthwhile investments. We’ll examine the top five common stocks for investors in more detail. These stocks were chosen due to their solid financial standing, room for expansion, and overall market position. These stocks represent one of the many categories of financial asset, from market leaders in consumer products to technological behemoths.
1. Walt Disney (DIS)
Selecting stocks to buy and hold for the long term requires careful consideration of various factors, and a crucial one is the quality of a company’s management team. In this regard, Disney has a major advantage with the recent return of its longtime CEO, Bob Iger, who is widely regarded as one of the best CEOs of the past two decades.
During his tenure, Iger oversaw a string of highly successful acquisitions, such as Pixar, Marvel Entertainment, and Lucasfilm, which have propelled Disney’s growth and success.
Although Iger stepped down from his CEO role in February 2020, he has now returned, and Disney’s recent first fiscal quarter earnings report reflects this positive development. In this quarter, Disney surpassed analysts’ expectations for both earnings and revenue, indicating that the company is on a solid trajectory under Iger’s leadership.
Disney is currently trading at $100.31, which is about 20% growth from the beginning of the year. Disney’s audience and its ability to keep them engaged make DIS a good buy and hold.
2. Amazon (AMZN)
Amazon is a common stock that is highly sought after by investors due to its growth and market presence. Amazon was founded in 1994 as an online bookstore, and it has since expanded into a global e-commerce market that sells a lot of things.
In the past, lots of people have made tons of money from Amazon, and the company always tries to follow the most recent market trends. This positions Amazon for exponential growth in years to come. Amazon is king when it comes to online sales, they also offer web hosting and subscription services. Amazon has also invested in other areas such as logistics, healthcare, and even artificial intelligence.
AMZN is currently trading at $93.50, which is about 13% growth from the beginning of the year 2023.
3. Pinterest (PINS)
Pinterest is a unique social media platform with a highly engaged user base. Pinterest operates a visual discovery and bookmarking platform that allows users to discover and save ideas for a variety of interests, including home decor, fashion, and cooking.
The company generates revenue primarily through advertising, which is displayed alongside user-generated content. Despite facing competition from larger social media platforms like Facebook and Instagram, Pinterest has carved out a niche by focusing on the visual aspect of discovery and providing a highly personalized user experience. The company has demonstrated impressive revenue growth and has a strong balance sheet with no long-term debt.
Pinterest recently expanded into e-commerce, and now allows users to shop online from its platform. This development is expected to increase the revenue generated by Pinterest. PINS is currently trading at $25.03, after experiencing a humongous plus 60% crash in 2021.
4. Meta (META)
Meta, which was previously known as Facebook, is one of the largest and most influential social media companies in the world. The company owns several other platforms, such as Messenger, Facebook, Instagram, and WhatsApp, which have an aggregate of billions of users globally.
Meta generates its revenue through advertising, which is targeted based on the data collected across its platforms.
Meta has a strong financial performance with high revenue growth and expanding profit margins. The company is also heavily invested in virtual and augmented reality, e-commerce, and digital payments, which are expected to drive its future growth.
Meta’s size and influence have attracted regulatory issues, which can threaten its long-term growth prospects. Meta is a popular choice amongst investors looking to add a common stock to their portfolio because of its strong record of innovation and success.
Meta is currently trading at $170.4 from its price of $115 as at 3rd of January, 2023.
5. Apple (AAPL)
Apple is a common stock that is one of the largest technology companies on the planet, known for its innovative products and strong brand reputation. Apple manufactures, designs, and sells a range of consumer electronics, including phones, laptops, watches, headphones, and many more.
The company generates its revenue from sales of services it offers, such as the App Store, Apple Music, and Apple Pay. Apple has a loyal customer base and benefits from its strong ecosystem of products and services, which makes existing consumers buy some of their other products. The company has shown strong financial performance with an exceptional profit margin.
Apple has also invested in sectors such as augmented reality, healthcare, and even self-driving cars. Apple is currently facing strong competition in the technology industry and still manages to deliver.
Because of the company’s profitability, it remains a popular choice for investors. AAPL is currently trading at $146.71 after starting off the year below $130.
Understanding the Common Stock Market
Investing in a common stock requires careful consideration and analysis of various factors. The company’s financial statements should be carefully reviewed; these include the income statement, balance sheet, and cash flow statement. This is to ascertain its revenue growth and profitability. Analyzing the company’s valuation metrics is also important to determine if the stock is undervalued or overvalued when compared to its competition.
The company’s competitive advantage is another factor to consider, and this will include its market share and growth potential. The management team should also be researched, as they play a crucial role in determining the company’s progress.
Investing in common stocks can provide potential rewards such as capital appreciation, dividend income, diversification, and liquidity. However, it also carries risks such as volatility, company-specific risks, market risks, and economic risks. Common stocks are subject to price fluctuations and can be highly volatile, which can lead to significant losses.
Company-specific risks such as poor management, regulatory changes, or negative events can impact the stock’s price. Market and economic risks, such as recession or inflation, can also impact stock prices. It’s important to carefully evaluate these risks and rewards before making investment decisions and to diversify investments across different sectors and companies to manage risk.
Key factors to consider when choosing common stocks
Choosing a common stock requires careful consideration of several key factors. These factors include evaluating the company’s financial health, growth prospects, management team, competitive landscape, and valuation. An analysis of the company’s financial statements, including the income statement, balance sheet, and cash flow statement, can help assess revenue growth, profitability, debt levels, and cash flows.
Evaluating the company’s industry and competitive landscape can reveal market share, competitive advantages, and growth potential. The management team’s experience and strategic vision, the company’s plans for expansion, new products and services, and risks to the business must be assessed. The company’s valuation metrics, such as P/E, P/S, and P/B ratios, should also be considered.
How to Invest in Common Stocks
Investing in common stocks can be an attractive option for those looking to grow their wealth, but the perceived complexity of the process can be a barrier to entry. Many individuals may feel discouraged by the prospect of having to find a broker and go through a tedious sign-up process.
Fortunately, online brokers such as eToro have made investing in common stocks more accessible and user-friendly than ever before. The intuitive design of eToro can simplify the investment process, but traders and investors should always be aware of the risks involved in trading common stocks or any other financial product.
With eToro, investors can take advantage of a simple registration process that removes the barriers to entry that once existed. By following a few easy steps, anyone can start investing in common stocks and potentially see their wealth grow over time
Step 1: Open an Account
To begin your investment journey with eToro, you can navigate to their website and select the “create account” option. This will prompt you to fill out a brief application form that requires only basic information and takes only a few minutes to complete.
Step 2: Upload ID
Once you have finished filling out the initial application form, the next step is to upload your identification documents to ensure compliance with KYC and AML regulations. This is a standard procedure that all reputable brokers adhere to, and it is aimed at preventing money laundering and fraud. The eToro team will carefully review and verify your documents, after which you will be able to start trading on the stock market. Some of the documents that you will need to provide are:
- Account Statement
- Utility Bill
- A valid passport or driver’s license
Step 3: Make a Deposit
Once your account is set up, you are ready to start investing in stocks. However, before you can begin trading, you need to make a deposit using one of the available payment methods, such as PayPal, a debit or credit card, or a wire bank transfer. This is a straightforward process that can be completed quickly, and once the deposit is processed, you will have funds available to buy the stocks of your choice.
Step 4: Search for Common Stock
Navigating through eToro’s user-friendly platform, you’ll have access to an extensive range of stocks for long-term investment. The simple and efficient platform enables you to purchase a share with just a single click, with a minimum investment amount of $10.
You can make use of the search bar, which enables you to look up stocks and get relevant information about them. Once you’ve made up your mind on which shares to purchase, you can proceed to click on the Trade option to place your bid. eToro also offers a stop-loss option that can come in handy whenever you need to protect your investment from potential losses.
Common stocks can be a very good way to store value, and it can be a very rewarding experience if done properly. Before investing in the stock market, be sure to do proper research and exercise proper risk management.
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