So you're looking for perusing the net for stock market for dummies information are you? Do you ever get the feeling that your investing mistakes sort of resemble a crash test dummy experiment? Let's hope you're one of the lucky ones who learns enough about how the stock exchange works before a real accident occurs.
If you've been searching for a stocks for dummies pdf or guide for any length of time, you realize that the stock market is a complex investing machine. The Internet however makes it easier than ever for stock trading and buying investments.
The New York Stock Exchange (NYSE) and the NASDAQ are the most important stock markets in the United States. Stocks represent ownership in a company. Companies sell them to raise money for expansion. The two main forms of stocks are: Common and Preferred.
When you own common stock in a company, you become a shareholder of that company. For every share owned, you are given one vote (a “proxy”) to exercise in the election of the company’s board of directors during the annual meeting. If the company fails, you lose your investment since common stock owners are the very last to be paid. As a shareholder you are entitled to a share of the company’s profits based on the number of shares owned. Profit distribution occurs through dividends (if the company does this), or through a rise in the stock price.
Preferred stock is more expensive than common stock since it offers more security. A Preferred shareholder is usually guaranteed a dividend for the duration of ownership. In the event of failure, preferred shareholders will be paid before common shareholders, but behind debt holders (banks, etc.). Voting rights may be stronger than those of common shareholders.
What makes stock market prices rise and fall? In short, it is based on supply and demand. Higher demand relative to supply = higher stock prices. Some investors establish the value by their sentiments and attitudes towards the stock and their expectations. Others do extensive research delving into various company statistics. The most important factor influencing a stock’s value is its earnings per share. It matters what it was in the past and how fast it is and will be increasing in the future.
A Bull market occurs when the economy is going great – lots of jobs and investor confidence is high.
A Bear market occurs when the economy is down – high unemployment with a decline in investor confidence.
Pigs are high risk investors looking for whopping short-term profits. They usually invest in hot tips without due diligence, are emotional, greedy, and generally get slaughtered.
When you’re ready to enter the market, you have a few choices on how to begin trading stocks:
Working with a broker is the most common method. Full-service brokers offer personal attention at a premium price. Discount brokers offer limited personal attention at a lower price.
Dividend Reinvestment Plans (DRIPs) and Direct Investment Plans (DIPs) are offered by individual companies and allow the buying of stock directly from them. The term DRIP is based upon the reinvesting of any dividends you receive to purchase additional shares in the company.
Owning a piece of the market is one of the best ways of creating wealth, but it is not without its risks. Make sure to achieve a solid understanding of how it works. Also keeping emotions out of investment decisions will greatly reduce your chance of a head on collision when investing in the stock market. Hopefully you have learned enough stock market for dummies terms and information to graduate to the next level. Maybe you can teach your friends what you have learned...because as you know, you can learn a lot from a dummy.
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