The beginner’s guide to stock market

“Just by watching that movie…oh, what was its name… Aaah! The Wolf Of Wall Street… It didn’t help at all! I’m
not earning that kind of money and oh, I want to!”

What are Stocks?

Have you ever wondered what this ongoing trend of investing in stocks is?? In simple words, a share of stock represents legal ownership in a business. Stocks exist for several reasons- to raise capitals, to earn returns, to allocate resources, to name a few. It is a simple system where you invest money. The person(usually a company) on the other side of the table may choose your stock. If their business, the actual operating company, keeps pumping out more and more cash, you get part of that cash simultaneously.

How do I make money from investing in Stocks?

Here are two simple ways to break down the money you’re going to get.

1. An increase in share price: Over the long-term, this is the result of the market valuing the increased profits as a result of expansion in the business or share repurchases, which make each share represent greater ownership in the business.

2. Dividends: When earnings are paid out to you in the form of dividends, you actually receive cash via a check in the mail, a direct deposit into your brokerage account, checking account, or savings account, or in the form of additional shares reinvested on your behalf

How to find investments that suit your comfort?

Now that you understand the basics of investing in stocks, the next step is to find investment ideas. You need the names of actual companies in which you want to purchase stocks. How can you find good investment ideas?

1. Browse the value line investment survey
The Value Line Investment Survey is one of the most convenient ways to access data and historical figures on hundreds of companies in only a few minutes. Investors can purchase a subscription in either print or electronic form.

2. Take a trip to your local area
Grab a pad of paper and run to a few of the shopping locations you regularly haunt. Make a list of the name-brand products you come across – products such as Washing powder, chocolates, magazines, electronics, books, soft drinks, etc. Consider each item a potential investing idea. Pick up the item and inspect the packaging to find the name and address of the manufacturer. Search the net, or call the number provided and ask if the company is publicly traded (meaning you can purchase shares of stocks in it).

3. Ask people who have experience
Talk to friends, co-workers, fellow investors who have been in the stock market for a while. There is no greater teacher than experience. They can tell you exactly where to invest if they’ve seen ups-and-downs in this market.

Why do Stock prices fluctuate?

Once you have come up with a list of potential stock investments, you need to actually jump in and start buying shares. When you own shares of stock, you better get used to your investment going up 50% or falling 50% over short periods of time. What, exactly, makes shares of stock go up or down?

1. Realize that the stock market is basically an auction, with one party wanting to sell its ownership, and one party wanting to buy ownership. When the two agree upon a price, the trade is matched and that becomes the new market quotation. Because the stock market functions as an auction, when there are more buyers than there are sellers, the price has to adapt or no trades are made. This tends to drive the price upwards, increasing the
market quotation at which investors can sell their shares, enticing investors who had previously not been interested in selling to sell. On the other hand, when sellers outnumber buyers, there is a rush to dump stock and whoever is willing to take the lowest bid sets the price resulting in a race-to-the-bottom.

2. Influences on buyers and sellers. On a typical day, the value of shares of stocks doesn’t move much. But sometimes, events can occur to cause shares to rise or fall sharply. It could be an earnings report that shows good or bad financial news. It may be a major financial news event, like an interest rate hike. It could even be a natural disaster, such as a tsunami.

The bottom line

With rising inflation and soaring prices, it becomes difficult for an individual to sustain the existing lifestyle with each passing year. It is important to investment or alternate sources of income in order to lead a comfortable life and secure your future financially. One of the most sought-after investments is the stock market, as it provides lucrative returns.

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