Researched from: Tracy V. Wilson - How Stuff Works and Citiseconline.com.ph
During the 1920's, the stock market was the realm of the rich and powerful. So it was said that when Joseph Kennedy got his stock tip from a shoeshine boy, he thought that something must have gone terribly wrong. He then sold all his stocks the day before "Black Thursday", the start of the catastrophic 1929 stock market crash. Many investors suffered enormous losses in the crash, which became one of the hallmarks of the Great Depression.
Since then, most people have a wrong connotation about stock market. Many believed that only the rich can have stocks. To monitor the stocks movement and arrived to a sound decision in terms of buying and selling are activities solely for those who can afford to lose money in the process.
Now, plenty of "common" people own stock. Online trading has given anyone who has a computer, enough money to open an account and a reasonably good financial history the ability to invest in the market. You don't have to have a personal broker or a disposable fortune to do it, and most analysts agree that average people trading stock is no longer a sign of impending doom.
But first, we have to equipped ourselves with basic lessons to understand this. As a start -
Stocks & Market
Like any market, the Stock Market is a place where people converge to engage in buying and selling. Instead of usual everyday goods, shares of corporations known as Stocks, are the objects of purchase and sale. A share of stock represents partial ownership of a company - and as such, it comes along with a share value. It is basically a tiny piece of a corporation. Shareholders -- people who buy stock -- are investing in the future of a company for as long as they own their shares. The price of a share varies according to economic conditions, the performance of the company and investors' attitudes. The first time a company offers its stock for public sale is called an initial public offering (IPO), also known as "going public."
When a business makes a profit, it can share that money with its stockholders by issuing a dividend. A business can also save its profit or re-invest it by making improvements to the business or hiring new people. Stocks that issue frequent dividends are income stocks. Stocks in companies that re-invest their profits are growth stocks.
Brokers buy and sell stocks through an exchange, charging a commission to do so. A broker is simply a person who is licensed to trade stocks through the exchange. A broker can be on the trading floor or can make trades by phone or electronically. Be sure to check a broker first before plunging to this investment. There are lists of accredited brokers available in Stock Exchanges in your country.
Illustration of buy and sell orders passing through the computer network/trading floor
When a business makes a profit, it can share that money with its stockholders by issuing a dividend. A business can also save its profit or re-invest it by making improvements to the business or hiring new people. Stocks that issue frequent dividends are income stocks. Stocks in companies that re-invest their profits are growth stocks.
Brokers buy and sell stocks through an exchange, charging a commission to do so. A broker is simply a person who is licensed to trade stocks through the exchange. A broker can be on the trading floor or can make trades by phone or electronically. Be sure to check a broker first before plunging to this investment. There are lists of accredited brokers available in Stock Exchanges in your country.
Illustration of buy and sell orders passing through the computer network/trading floor
An exchange is like a warehouse in which people buy and sell stocks. A person or computer must match each buy order to a sell order, and vice versa. Some exchanges work like auctions on an actual trading floor, and others match buyers to sellers electronically. Some examples of major stock exchanges are:
* The New York Stock Exchange, which trades stocks auction-style on a trading floor
* The NASDAQ, an electronic stock exchange
* The Tokyo Stock Exchange, a Japanese stock exchange
Worldwide Stock Exchanges has a list of major exchanges. Over-the-counter (OTC) stocks are not listed on a major exchange, and you can look up information on them at the OTC Bulletin Board or PinkSheets.
When you buy and sell stocks online, you're using an online broker that largely takes the place of a human broker. You still use real money, but instead of talking to someone about investments, you decide which stocks to buy and sell, and you request your trades yourself. Some online brokerages offer advice from live brokers and broker-assisted trades as part of their service.
Other Online Investments
In addition to buying and selling stocks, you can make a number of other investments online, depending on what your online brokerage offers. Several firms allow investors to participate in IPOs. Some also allow you to trade in:
* Options - contracts granting the right to buy or sell stock at a specific price on or before a specific date
* Mutual funds - companies that combine many people's money and invest it in a variety of companies
* Bonds - loans to companies or businesses that are repaid with interest
* Futures - agreements to buy or sell stock at a future date
Most investment analysts consider options and futures to be the territory of experienced investors.
But you must be wondering? What is the difference between investing & trading?
As Citiseconline.com.ph explains
* Options - contracts granting the right to buy or sell stock at a specific price on or before a specific date
* Mutual funds - companies that combine many people's money and invest it in a variety of companies
* Bonds - loans to companies or businesses that are repaid with interest
* Futures - agreements to buy or sell stock at a future date
Most investment analysts consider options and futures to be the territory of experienced investors.
But you must be wondering? What is the difference between investing & trading?
As Citiseconline.com.ph explains
"The difference between Investment and Trading are the inflexible use of time and risk. Though they are different in terms of holding period, their goal can be the same - the amassing of profit.
