Introduction to the Stock Market

Most people will be surprised by this. The market isn't so hard to understand as someone might think. By the time you finish reading this small article, you will have enough information to set up a path to stock market success. You have to learn about the market in small little steps, otherwise you may become overwhelmed. The information provided should not overwhelm you.

The Stock Market (or the world's auction house)

To begin to appreciate the market, you should think of it as a large auction house (like a flea market), where people buy or sell small pieces of paper called a stock. On the one hand, you have owners of a corporation looking for an easy way of making some money so they can expand, hire new employees, build factories, or even upgrade their information. The best way of raising this much needed money is buy issuing shares (or pieces) of a company, like a corporation or firm. This is how owners of firms raise money. On the other hand, you have individuals, like me, or you, buying these pieces of paper (stock). The exact place where we meet to do these transactions is called the stock market.

What exactly is a piece of stock?

If you think we're talking about animals or live stock here, you are actually wrong. But, believe it or not, the word originally came from the exact word, "livestock". Except in this case, you aren't trading animals like sheep or pigs, but your trading little pieces of paper, or ownership (shares), in a company. These are also known as equities, or a security. The entire market is based on the science of supply and demand.

When you go out to buy a share in a company, you the investor, is known as a shareholder. When you own a piece of stock, you actually own a piece of a company. You also get a vote in the company for each piece that you buy. The more of these stocks you buy, the more of the company you own, and control. Most investors hold only a small amount of stocks, and so control very little of the company. You would have to own hundreds of thousands of shares to even control or have a say in a company's business.

To summarize what has been said, a corporation gives out issues of shares in return of raising capital. If a company does well, so does the shares, and consequently it goes up, and you make a profit. If the company does very poorly, the stock will go down in price.