The best advice you can get about stock market investing is to go into it with your eyes open. That means doing your market research and analysis and then carefully selecting and picking winners. This brief guide will give you a basic stock market tutorial so that you can familiarize yourself with some key concepts and be better informed before investing.
Stocks are pieces of ownership in a company. Also called shares, they represent a part of the shareholder’s interest in the company’s profits and assets, but not necessarily liabilities.
Some stocks earn you a regular payout, called a dividend – which is your reward for investing your money in that stock. You can also sell stocks at a higher price than the one you bought them for to make a profit.
The stock market is like an auction house where shares are bought and sold and buyers and sellers determine a price by bidding on stocks.
Stock prices fluctuate, sometimes wildly, during the day of trade, as buyers and sellers drive the stock’s demand and supply.
Companies don’t trade stock directly; instead once they have offered the stock to the public in an Initial Public Offering, they then let buyers and sellers directly determine demand without interference.
A stock exchange is a place that facilitates the trade of stock.
When you want to buy stock in a company, you call a brokerage firm and open an account with them. Alternatively you can use an online broker.
To set up an account with a brokerage, you need proof of identity – social security or drivers’ license.
Generally, greater risk in the stock market means a higher return, although this isn’t always true.
Stock tables appear in your daily newspaper and contain important information to help you monitor your stocks – you should read this everyday.
Your personal finances should be in good shape and you should have some spare cash for stock investing as it can be a time-confusing, and for the novice, risky venture.
You should read books, magazines and internet articles on stock market tutorials to better acquaint yourself with the market’s dynamics.
The three main stock indexes in the US are the Dow Jones Industrial Average, the NASDAQ, and the S&P 500.
The main stock exchange in the US is the New York Stock Exchange (NYSE), where most blue-chip stocks are listed.
A company’s stock cannot be traded at the exchange if it is not first listed on that exchange.
The stock market is a place of much fervent daily activity. It’s constantly in the news and very sensitive to changes in the world’s economic and political climate. To make sense of it, you must give yourself at least 6 months to a year to fully understand its intricate workings. You can, however, begin to start investing small amounts and learn as you invest because after all, experience is the best teacher. This stock market tutorial should have given you an idea of the basics; now you can easily explore the concepts outlined here in more depth for greater understanding and ultimately higher returns.