Jul 17, 2011

Posted by in Penny Stock | 0 Comments

Understanding Stock Market Basics

Stock Market Basics – For Beginners

stock-market-basicsIt is important to understand a few stock market basics when you decide to add them to your stock investment portfolio.  You need to understand where you are putting your money in order to protect yourself.  You should not only know what stocks are, but you should also keep in mind that there are different types of stocks as well as how they are traded, how to buy them, what causes the prices to fluctuate and other kinds of information.

Of course, the first part of stock market basics is knowing the definition of a stock.  This is a share in a company’s ownership.  This means you have a share in the company’s assets and its earnings.  The more shares you have in a company, the more powerful your voice becomes.  However, the more shares you have in a company, the more you have to lose if something goes wrong.  Furthermore, you do not have a say in the company’s day to day operations.

Stock Market Basics with Stocks

Another important aspect of stock market basics is the difference in stocks.  There are two types of stocks as well as various classes.  Stocks can be either common or preferred.  Most stocks come in the form of common stocks, which yields you one vote per share when it comes to electing board members.  Preferred stocks give you some ownership in the company, but you do not have the same kind of voting rights.  However, you get a guaranteed fixed dividend no matter what happens with the company.

Keeping up with the factors that cause stock prices to change is also an important part of stock market basics.  This is usually a simple matter of supply and demand.  In other words, the more people want to buy a stock, the higher its price becomes.  If more people begin to sell off their shares of a stock, the price will fall.  There are many reasons why people may decide a stock is worth buying or selling.

Eventually, you will want to get to the point in which you can read stock tables and quotes.  You also want to consider the factors that make an ideal risk in a stock.  You need to be comfortable with the amount of risk a stock will present before you make an investment.  No matter what stock you eventually choose, you need to keep in mind all the stock market basics to help guide your decision.

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