Remember how independent and freeing it was to have your first checking account and credit card? It seemed as though you had reached a major milestone in your life – and in many ways, you did. It’s a rite of passage, after all. You’re leaving those irresponsible years behind in lieu of a better and more financially driven life.
Now, though, you’re settled into your career; you’ve come through the growing pains of learning the hard way of what an NSF fee is or how devastating a missed credit card payment can be. Now, you’re ready to make a few investments. That is, until you realize you have no idea how the stock market works, the differences in stocks and shares or even what the numbers mean in the ticker that runs in the corner of the big media outlet websites.
There’s no denying that one of the smartest ways of making money is investing in stocks. The American stock market is the most powerful financial institutions ever created. Everything financially driven has roots in stocks. Investors and businesses, individuals and global economies: it’s all about the stocks.
Want to play with the big boys? Trading stocks requires more than a general understanding; in fact, some insist it requires a significant amount of study and an an in-depth understanding before you can even begin to invest and then turn a profit. What you need is a straightforward, honest and easy to understand foundation. And here’s where you’ll find it. So put your credit card away for now, settle in and explore our tips for beginners for understanding the stock market.
The Stock Market
In its most basic terms, the stock market is a highly detailed and specific system that allows buying and selling stocks and shares. It’s where business happens and deals are made.
An “index” is the number given to all of the world’s markets. It provides a number that tells the tale on how well it’s performing. If you’re like many, you keep an eye on the numbers throughout the day. You might watch the Down Jones as it fluctuates between red and green numbers, as well as the S&P and Nasdaq. The values are based on a number of dynamics, including how other stocks are doing. It’s intricate and it’s important as beginners are looking for a foundation to build from.
Stocks or Shares
When you buy a stock, you buy a small fraction of a company that’s issuing it. A company “goes public” or becomes a “stock listed company” when it opens up and sells part of its holdings with the goal of raising capital.
This is called an Initial Public Offering, or IPO. Remember the massive Facebook IPO in May? The whole world stopped to watch it unfold. That was Zuckerberg’s IPO. The stocks are sold at a fixed value in this initial or “first” sale. After that, the offering goes to the secondary market, which is the actual stock market. They’re classified one of two ways, either as common or preferred.
Preferred stock owners are afforded certain benefits or privileges. It might they enjoy first preference when it’s time to pay dividends. On the other hand, common traders typically are considered after preferred holders when it’s time to pay dividends.
That said, they also are afforded voting rights when it comes to the company’s decisions. Preferred owners generally are not made privy to this aspect. If you’re buying stocks on the market, odds are, they’re common stocks.
Investors and Transactions
Investors on the stock market make transactions. Brokers handle these transactions on behalf of his investors and the currency he uses are shares or bonds. The prices vary from one minute to another, depending on a number of factors, such as supply and demand and other outside influences, even what the competition is doing.
The outcry is what most people associate with the stock market. This is where traders come together and in a very unique and interesting way, “communicate” their individual quotes or bids to sell their stock in the stock market. In many ways, it resembles an auction. Bidders change in seconds and once bid is deemed highest, it comes to a halt. The goal of traders is always buy cheap and sell high – it’s what guarantees profits for both themselves and those who put their trust into him.
Assume Nothing
The absolute best advice anyone can give a beginning investor is to assume nothing – not even a profit. It’s exciting no doubt, but keeping it in perspective is crucial. It’s just not easy to make money trading stocks. Confidence can only come with an in-depth understanding of how the stock market works its own magic.
There are balance sheets, past performances, dividend yields, volumes and a host of other considerations. It takes time – but it’s most certainly time well invested for those serious about understanding both the American and global financial sectors.
Similar Credit Card Blog Posts
- Does Dubai Have the Right Financial Ideas?
- What Trends in the Credit Card Industry Suggest
- MasterCard Prepaid Debit Cards
- What You Need to Know About Student Loans
- Thinking Balance Transfer?
- Will Cash Crash?
- Ally Bank Online Savings Accounts Review
