Making money passively can be a risky business. To start, you will need capital to offer as well as a company to invest in. Before beginning it’s important to be well researched in trading topics, as this will increase success. Two ways to make lots of money passively, is through blue chip stock and day trading.
Blue Chip Stocks
Blue chip stock is a type of stock one can acquire. Chips are used to denote stock of a certain quality.The term blue chip stock refers to a blue poker chip. In poker, a blue chip is the most expensive unit a player can use.As such, blue chip stock tends to come from large, well-establishedcompanies. These companies have been around for a long time and are financially sound; stock in these companies are considered the best kind of stock. Most likely, you’ve heard of them. Examples of blue chip companies are: IBM, Johnson & Johnson, Verizon, American Express, BP and HSBC.Blue Chip companies pay regular dividends to their shareholders; typically, these dividends increase with each cycle.
There isn’t a specific moment a company reaches blue chip tier. Some believe companies that have been around for years and have reached the benchmark of $5 billion market capitalization have earned the status of blue chip. While others have a higher standard, setting the benchmark of market capitalization much higher. The median of market capitalization in 2016 was $63 billion.Because the stability of blue chip stocks, they are considered safe. Companies in this tier have a higher survival rate despite any challenges that might occur. Most blue chip stock doesn’t fail, but sometimes they do. Large companies such as General Motors and the Lehman Brothers declared bankruptcy in the American Recession of 2008. Fortunately, blue chip companies tend to bounce back easier than others.
It’s tempting to only have blue chips in a stock portfolio, but that would be foolish. They should make up the core holdings of your portfolio. A good portfolio is diversified to have a larger yield. In the United States, the most well known index for blue chip stock is Dow Jones Industrial Average. It’s only hosts blue chip companies, although not all blue chip companies will show up on the DOW. If you’re a beginner, the best thing you can do to prepare for investment in a blue chip stock is to research. Study all legal and tax requirements of buying stock in your country and state. In some countries, for example, it is illegal to sell stock within six months of buying it. Doing so will result in lots of additional taxes and fees. If you’re a seasoned stock trader, research the stock you want and its competition. Make sure you’re getting the best deal you can by comparing initial deposit fees, among others. Lastly, start slow and build. It’s okay to buy stock and sit on it before trading it for more.
Day trading involves buying and selling capital in the same day. Generally, traders try to find easy to obtain stock and sell them as prices in the market changes. The goal is to leverage capital to take advantage of smaller capital. There are many different strategies to day trading as it is quite risky. If not done correctly, one can lost a lot of money in the market, however, even if substantial research is done, money can still be lost. There are two types of day traders industrial and retail. Retail traders typically trade with their own capital. Industrial traders work with financial institutions.As a day trader, you want to look for three things, high liquidity, volatility and volume. Liquid stocks are less expensive and easy to buy. Volatile stocks are stocks that change value sporadically. The volume of stock is how much the stock is traded. If the volume is rising, it means the value of the stock is about to change Pay attention to trade volume index, as it measures the amount of money flowing in and out of an asset. If you want to begin day trading there are many sites that offer their services and stock you can buy.