What is the Stock market? In simple terms it is place where you buy and sell stocks and shares. It is where the trading in securities is managed. It has become a major driver to the market economy as it provides business access to investors and their capitol. The investors risk their capitol for the chance of profit based on the future performance of the companies they invest in. In the USA there are 3 central stock markets some times called stock exchanges.
The NASDAQ stock market, which was created in 1971, was the first electronic stock market in the world. NASDAQ stands for, National Association Of Security Dealers Automated Quotation and is located through a telecommunications network. In other words there is not an actual physical place where you are able to see NASDAQ because it's connected electronically to the companies it represents.
The NYSE stock market, which stands for New York Stock Exchange, is a corporation operated by a board of directors. The board of directors is responsible for listing securities along with setting policies and supervising their members' activities. The NYSE uses floor traders; people that is, to make trades unlike other stock exchanges that typically use computers to make their trade transactions.
The AMEX or American Stock Market is the final one of the big 3 in the USA; it processes approximately 10% of the securities traded in the USA.
Stock exchanges also process what is called "over the counter markets" or OTC; this is also know as the Equity Market. These are the listing of small companies stocks. In the USA there are two OTC exchanges; they are the "Pink Sheets" and the "OTCBB" or Over the Counter Bulletin Board. This is where companies who are not traded by the big 3 are managed.
These markets give the opportunity to investors to own shares in publicly traded companies. They provide 2 ways to profit from the markets; through dividends or capitol gains.
Capital gain means that there is an increase in the companies' capital assets, such as an increase in their real estate value or an investment they have made. Thus in return gives them a higher worth than their original purchase price within the stock market. This will make the value of each share increase including the share or shares that you have bought.
A dividend is a payment of part of the company's profits; this is decided on by the board of directors. The set the level of divided to be paid out per share; the more shares owned the more return the investor receives.
Being a shareholder you become one of the many owners of a company. This gives you the right to a claim on all the company owns. You are entitled to a share in the company profits as well as the right to vote dependant if the stocks you have purchased through the stack market have voting rights included. The more stocks you own the more of the company you own and the more you can earn from the companies earnings.
There are 2 types of shares an investor can purchase; Common and Preferred shares. A common share has little preference with a company; for example should they decide to go into liquidation or become bankrupt the owners of common shares will not receive any capitol back until the creditors and preferred share holders are paid. Preferred share holders have this benefit however they do not have voting rights.
Trying to understand the stock market appears to be extremely difficult and yes it does take some time to understand. If you break the aspects of the stock market down into sections and study them one at a time you just may find its not as complicated as it may seem. The stock market can be complicated but if you're a beginner just take it one step at a time it really isn't as difficult as it appears.
Financial information is so readily available both offline and online, it is surprising to learn that successful investing is still a major mystery for many folks. The biggest problem is not the lack of information, as there is plenty of information around for anyone who wants it. The real issue is the lack of security and predictability, and the way in which people deal with it.
It is a basic wish for people to be secure, and they also like a certain degree of predictability in their actions and investments. But balancing this is their desire to make a profit. The biggest problem is that in order to attain high profits, there is usually a high degree of risk.
Of course, one solution to this dilemma would be to simply put your money in a savings account, collect a little interest and just relax. If this sounds good to you, you are probably better off taking this course of action, and you do not need to read the rest of this article.
So, if you're reading this, you are probably not satisfied with the small returns that you get with savings accounts, and you need your money to work a little bit harder for you.. But you would still like to minimize your uncertainty, and find a certain amount of predictability in what you are doing. I can give you a prediction that has a very high degree of certainty.
If you invest in the stock market, two things are bound to happen. Firstly, you will make money sometimes, and secondly, you will lose money sometimes.
That should at least cover the uncertainty factor. This probably sounds a bit simplistic and if it does, that is good, because the point I am trying to make is very simple. It just is not feasible for you to make money every single time you make a transaction. Even Warren Buffet does not make money on every single investment he has ever made, and you are talking about a master here. The best traders and investors in the world lose money on a certain number of their transactions
On the flip side, it is very difficult to lose money every time you invest. Yes, you will hear some claim that they have never made any money on their investments, but there is a high probability that this just is not true . Even these people have made money on some of their transactions, but they probably re-invested that money into other stocks that ended up losing money.
It can be likened to the time spent sitting at a slot machine. After you play for a while the machine will start throwing out a mountain of coins, resulting in a nice profit. But instead of calling it a day and pocketing your winnings, you simply keep pouring money into the machine until the very last coin. Then you go home wondering why good luck never comes your way. The fact is, you did do ok, but it is what you do with your windfall that matters.
It is important to face the fact that losing some money from time to time is ok, and you need to accept that. This does not give you the excuse to feel fine every time you lose money. You should always have the goal of making a profit, but you need to be aware of the fact that you cannott realistically expect to make a profit every single time. This will ease some of the fears of failing, since losing money on an investment does not mean you are a failure as an investor. Many people never get started just because they are afraid of losing money. And if they do lose money, they feel they have failed and retreat from the stock market in its entirety, never to return again.
If this has not personally happened to you yet, just take a look around. Do you ever remember a friend or relative telling you about their investments? Just about every time you bumped into them they would tell you how good their stocks were doing and how much profit they were making. And then, suddenly, they completely dropped the subject. You never heard them mention it again. And if anyone asked them how their stocks were doing, they would either mumble something inaudible or utter some kind of defensive statement. What is likely to have happened? You guessed it. They lost their money and withdrew from activity in the stock market. They have essentially given up, and in doing so, they have lost. Not because they lost money, but because they gave up.
If you want to be a successful investor, you cannot afford to handle it like that. The thought of giving up surface when things are not going your way, but you should never give in to it. When it comes to successful investing, your attitude is more important than your knowledge, just as this rings true in many other areas of life.
You should always try to learn all you can about investing because you do need knowledge. Even if that knowledge is just the basics of how the stock market works. You also need to learn from your mistakes, but you have to realize that you will not be successful 100% of the time. So before you put your money into the stock market, or any other investment for that matter, remember this: You will win some and you will lose some.
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