The stock market is complex, but it runs on basic economics. When you buy stock, or shares, you're buying part ownership of a company. Ideally, you buy at a low price, sell at a higher price, and make a profit.
A stock exchange is the common ground where buying and selling, or trading, takes place. You've heard of the New York Stock Exchange, the American Stock Exchange, or NASDAQ. Much stock market trading is now done online.
In general, the value of stock is determined by supply and demand. If ABC Company is booming and the future looks good, stock will be worth more on the market than DEF Company, whose sales have dropped.
You can invest in just about anything, from bananas to wind power to internet start-up companies. Online stocks are easily available. To minimize your risk, invest in an industry you understand.
There are two types of stocks: common, and preferred.
Research is your best friend. People will offer you stock market secrets, or tips on stocks and bonds, but check them out yourself. Rumors are as common as mosquitoes in a swamp.
If you're ready to buy stocks, you need to act through a broker or brokerage firm.
A licensed broker can be one person, or a company. Many specialize in online trading. Stock market investing has fees and legalities attached, and a stockbroker takes care of these. You can opt for a full-service or discount brokerage.
Do your research before choosing a broker. If you prefer face-to-face meetings, look into a local company. Otherwise, online stockbrokers are abundant. Make sure to choose a broker you can trust.
From stock market guru Warren Buffett, to stock market scoundrel Carl Icahn, every sharp investor gives the same tips for success.
With a few basic principles, you're well on your way to stock market success.
by M.J. Holliday