Think before you invest in Stock Market
In recent years the stock market has seen substantial declines. People who have been investing in the stock market over the last few years may be reluctant to open their statements for fear of seeing how much their portfolios have declined. For the beginning investor, this perspective can result in procrastination in stock investing.If you are about to begin investing in stocks, understanding the financial markets may be as confusing as the cockpit on a 747 airplane. All of the financial, speculative and market data that is available can leave you feeling overwhelmed, but without knowledge that you were seeking.
Although people have been trading and investing on the stock market for over 200 years ago, there are still many people not familiar with some basic aspects of this arena. The stock market is an everyday term we use to talk about a place where stocks and bonds are "traded" — meaning bought and sold. Stocks are units of ownership in a company. The sophisticated term for issuing stock to raise money is equity financing. The money received from investors who buy stocks is called equity capital. Companies issue stock to raise money. They use this money to finance expansions, pay for equipment or any other resource-intensive activity. Corporations may issue stock when they need additional capital to operate successfully. If the company's profits go up, you "share" in those profits. If the company's profits fall, so does the price of your stock. If you sold your stock on a day when the price of that stock goes above the price you paid for it, you would make money.
This site was written as an overview, to serve as a reference to the main points about the stock market and assist the reader in making more insightful decisions in their investing careers. The article should not be read as a technical investing guide, but rather as a simple outline of stock market investing, written in a style that is friendly and easy to understand. This paper touches on the history of stock market, market conditions and discusses the main players in the market. In this study guide various stock types are covered, including the variations on the typical stock buy/sell theme.
Stocks are the longest-term investment you can buy. When you are investing in a company stock, you buy a piece of its future. You now own a piece of all of that company's future profits until the end of time or the end of the business (hopefully, in that order). Several empirical studies have shown that over the long-term (10 years or greater), equities or common stock vastly outperformed all other investment tools including bonds, term deposits and preferred shares. As a result, for the overwhelming majority of the investing public, long term exposure to common stocks through individual companies, mutual funds, or index based investments is usually a good idea.
Many investors trade stocks based on hot tips from friends, phone calls from a broker, or recommendations from a TV analyst. They buy stocks when the market is hot. When the market turns cold, they panic and sell shares for a big loss. Typically, this is the horror story we hear about investing in the stock market. This is a typical investing method of someone who does not have an investing strategy.
Before investing a substantial amount of money into stock market, an individual must be well aware of the risks and benefits involved in this kind of investing. In simple terms, risk can be defined as the uncertainty of an outcome. There are many types of risks to account for, as well as ways to minimize a risk associated with any particular investing strategy. One must also be careful to watch out for some of the pitfalls of day trading as an investing strategy. The unreliable nature of social security and tax benefits of 401K and IRA accounts are just two advantages of investing in the stock market. Finally, a reasonable knowledge of benefits and risks of alternative investing methods is useful.
