Basic Stock Market Knowledge

The stock market is a place where virtually anyone can make trades in an effort to make money. Some use the stock market as a retirement vehicle. Some use the market to make extra holiday cash. Some utilize the stock market to make a living. The stock market is a place to both make money and generate money. The corporations that offer the stock benefit from the raised capital. The stock market provides virtually anyone with an opportunity to own a business in which they do not have to report to.

When many people hear the words stock market they generally think "rich mans game". It's important to understand from the beginning this is not true. A "rich man's game" projects an image that only very wealthy people can invest in the stock market. Thinking this way only indicates one thing...ignorance. I personally know people that I consider rich (net of 1,000,000 +) that successfully invest in the stock market. I also know people that are not rich that successfully invest in the stock market. Successfully investing doesn't necessarily mean consistent returns of 100 %, but instead it means trading money for a stock in a company and reaping small to decent returns over a period of time.

The stock market is a vehicle that generates wealth for investors. Is investing risky? Well, there are no guarantees. There are literally hundreds of investing strategies that can be found all over the place (Internet, library, etc). One of the most important variables to successful investing is understanding where the money is going and what the investing strategy is. Anyone can manage their own money and invest wisely. A financial adviser is not a must, but they can be very helpful evaluating current financial situations, and creating future financial goals.

It's important to understand the basics of stocks and how the market operates before investing. A stock defined is simply a share of a company. Shares, stocks, equities all represent the same thing. When you buy shares you buy a part of the company and instantly become a front line cheerleader for the companies growth and prosperity. After all, you do want the company (your stock) to grow in value. Individual investors do not have a say so in the material running of the business (unless you are a billionaire entrepreneur). It is important to understand this fact.

Bonds vs Stocks (equities). Understanding the difference between bonds and stocks is also very important. Remember, stocks are part ownership in the company. A bond is classified more as debt financing. A bond is a guaranteed return. The company must pay the principal along with the agreed interest. If a company goes bankrupt and an investor has stock in the company; well guess what? The investor losses all stock value. On the other hand, if an investor owns bonds in the same company all principal will be paid anyway. All assets will be sold and the bond holder will be paid first. Stock holders are part owners so they go down with the company. Bonds may be a great choice for the conservative investor.

Stocks are traded Monday through Friday on exchange markets. There are many different exchanges encompassing many different companies some include international companies. Some of the well known exchanges are the New York Stock exchange (NYSE), the NASDAQ exchange, and the American Stock Exchange (AMEX). The NASDAQ has many technology stocks. Research the different exchanges and what each encompasses.

All publicly traded companies have 'ticker' symbols. These symbols are important to know if you plan to research company charts, quotes, etc. For example Netgear Inc has the ticker symbol NTGR. With this symbol I can research virtually everything about the company in terms of finance, research and development, the companies bottom line, etc.

The honest truth about what truly makes stock go up and down in value is perception. What people think a stocks performance will do determines if they want to buy or sell it. Stock fluctuation is derived from supply and demand. This is a very easy concept. The more people that want to buy a stock the higher the price (high demand). The more people that want to sell the stock (low demand) the lower the price.

There are many online brokerages that offer great opportunities to invest with minimal fees. Today, we have what is called discount brokerages. With a discount brokerage you get virtually everything you would from a full service broker (only less fees). Some great online trading grounds are Fidelity.com, Scottstrade.com, and Etrade.com.

Remember, investing in the stock market is anyones game. Whether you have $500.00 to invest or $500,000,000 to invest. It is fun and it reaps great rewards. Some investors feel that stocks are going to decline in value (bear). Some investors feel that stocks are going to grow in the long run (bull). Whatever your take it doesn't matter because both bears and bulls make money. Stock investing is not a get rich quick game. It is a sophisticated way of making money work for your benefit. Research stock investing, save some extra money, and invest!

Greg Webb