Yes, in theory the above can be true but there are two ways to do that , the first one to start a company, make it profitable, sell a a majority share to somebody else then reap the fruits of your labor through that minority holding in that company. The other way is less labor and you can get started with as little as $1000. Start investing in a company you like on the stock market,once you own the shares you become the part owner of the company even through the part ownership may be only .002% of the company. But hey, you are still an owner and as you learn the stock market basics, take some risks, reap some rewards you can play bigger and become an owner of a bigger part of the company.
Before you take your cheque book out and start looking at companies to buy for $1000 , you should know the stock market basics and then start investing to make more money. It is absolutely very important to understand all the stock market terms and technical lingo which gets thrown around quite a bit to make some serious money in the market.
Let us get the initial understanding of what is a stock? I will take an example of a company called XYZ, newly formed and into the business of selling shirts. This company XYZ will need money to buy machinery, raw material, pay for employees salary etc and the money will come in the form of loans, money from friends and family and also you sell some part of the company to other persons or companies. How do you part with ownership of the company is that you create shares or parts of the company for say $10 each . Let us say you create 100 shares of the company , that means the total share capital of the company is $1000. Now ideally to maintain a majority shareholding XYZ company can sell 49 shares and still be a mahority shareholder.
Now let us assume that you are the person who bought 49 shares of the company XYZ at a price of say $10 only, the company is making decent amount of profits, then you would like to sell those 49 shares to someone who is willing to pay more than $10 to you. The place where you could Ideally go to buy or sell something is a market and that is what a stock exchange is all about, a place to market your shares or let us say either buy or sell the shares of the company XYZ.
Conclusion
This is in simple terms what is a stock and what is a stock exchange.
Stock Market For Kids
I have heard people refer to the market being "overbought" or "oversold" for as long as I have been a student of the markets. To be sure, only one of the two terms has any credibility and that is oversold. There is one case for this, and that is when the market is trading at zero. That is oversold! It is the only real case. Since the market (S&P 500) is trading at 1270 as I write this, I guess that isn't likely to occur today (or at any time in the near future for that matter).
Unfortunately, for those who wish to use the term "overbought", it is important to note that the market has unlimited upside potential. So this case can never really occur. So there is no such thing as overbought at all.
I suppose people mean some kind of relative term when they speak in this way. In this manner, "overbought" translates to the market is high (higher than it was before). "Oversold" would translate to mean it is lower than it was before. Since the market alternates in a range a huge percentage of the time, one would conclude that such terms are even more un- meaningful than would otherwise have been the case. Let's look at it from the other side of the coin. For 1990-2000 the market remained overbought for a period of about ten years. I suppose there were occurrences within the minutia that could have been relatively higher or lower compared to the past, but what is the use of a term that draws your attention to the obvious. That's why I decided to coin a couple new terms, to put a new perspective on the whole thing.
This is really quite exciting. A revolutionary new concept. My new terms (and feel free to use them widely to get the buzz going) are "Underbought" and "Undersold."
Yes, I know, undersold is already in use. Well, not in this proprietary sense in which I intend its important new meaning. You see, "undersold" is the opposite of "underbought."
So what is this "Underbought?" Quite simply, it is when the market has not raised enough to be where it will be in the future. This means "undersold" occurs when the market has not declined enough to be where it will be at in the future. So these important key terms carry a whole different kind of meaning to their (rather meaningless) counterparts "overbought" and "oversold."
You see, "overbought" and "oversold" look at the past to decide where you are now. But underbought and undersold, look to the future to tell you where you ought to be. This is a huge difference! This is especially true since it is only the future price (with respect to where we are now, or have entered the market) that has any meaningful value to us at all!
I want to start a movement of future looking market participants that don't dwell on the past. Let's get over it and move on. The fact is the most successful investors in the world are forward looking market participants. They trade developing trends in the markets. They are anticipatory investors.
This means that most people who are not successful in the markets spend their time oriented to the past. Conducting "backtests" of data to see how the future will be. Ouch. So I vow today to never say "overbought" or "oversold" again and give myself to the infinite future that stands before me. Its "underbought" and "undersold" from here on out baby! Please join me in the revolution to make these important new trading terms a solid reality!
Both Amit Kheterpal & Rob Mitchell are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Amit Kheterpal has sinced written about articles on various topics from Fitness, Property Investment and Parenting. Amit provides a comprehensive guide to and helps them learn the. Amit Kheterpal's top article generates over 40500 views. to your Favourites.
Rob Mitchell has sinced written about articles on various topics from Finances, Investing and Trading and Finances. Rob Mitchell is co-owner, researcher and head trader at EminiForecaster.com , an internet website specializing in cyclical stock index swing trading.
