Basic Facts About The Stock Market 1214223767149132 8Document Transcript
Basic Facts about the Stock Market
You can’t go far in today’s world without hearing something about the stock market.
Unfortunately, the media take for granted that all of us in the audience understand the
stock market. The good news if you don’t have a clue how to interpret all of those stock
symbols running in the ticker at the bottom of your screen you’re not alone.
But that’s about to change. Below is an overview of some of things you need to know
about the stock market.
Stock Market Background
The purpose of the stock market is to allow businesses to grow and to let investors have
a way of earning money. Let me give you an example on a very small scale. Your child
opens up a lemonade stand in your neighborhood for a week. She earns a decent profit
and decides to open up a second stand at her grandparent’s house. Unfortunately, she
doesn’t have enough money for the expansion. Other kids could pitch to cover the costs
and receive a portion of the profits she makes.
That’s exactly what happens every day in the stock markets all over the world with
thousands of different companies and millions of stockholders.
How to Invest in the Market, Stock Purchasing Guidelines
If you want to purchase stocks, you’ll want to form a relationship with a stock trader.
These are individuals who work in the stock exchange, through virtual stock exchanges,
or with trading software. You’ll give them your money, tell them what you want to buy,
and they’ll complete the transaction on your behalf. For this service, they do receive a
commission on the transactions.
Some people also use their traders for stock advice. However, you can make your own
choices about which stock to buy. Obviously, the secret to making money is to purchase
stock at a lower price and sell it at a higher price. That may sound overly simplistic but
it’s this thinking that drives all investors.
Another idea to understand is supply and demand because this affects the prices in the
market; stock prices go up and down based on this basic principles. For example, if lots
of investors realize that big is happening for a company they may all decide to purchase
stock in that company. That decision increases demand for that stock thus raising the
price. On the other hand, if the same company has a poor financial quarter many
investors may start selling off stock which means the supply is increasing and the price
Earning Money from Stocks
Another question you might have is how you earn money from the stocks. As a
stockholder, you receive a portion of the company’s profits. When the company
determines their earnings and deduct all of their expenses, they are left with their profit.
That profit is divided by the number of stockholders and each receives a portion. For
example, if you own 1% of a company which generated $2 million in profit then you
would earn $20,000 for your stock. If the company doesn’t make any profits, however,
you don’t receive anything.
Arkaitz Arteaga MarketStock.net