how does the stock market work?

Question

I would like to invest some money in the stock market, the only problem is that i really dont understand how it works. Can some one just give me some basics about the stock market? thank you

Answer 1

The stock market is trading in stocks or shares.
There`are two main reasons why you may buy stocks
1 for the returns on them that is dividend
2 To see the appreciations in the value of the shares
and sell that is called capital gains.
To start trading you have to know a lot about the company who/s shares you want to buy.

be mindful that as much as prices appreciate it can also drop drastically making you loose money. Be alert and careful if you want to go to the stock market.

Answer 2

Ownership of public companies are broken up into shares. When you buy stock, you're purchasing part of a company. So if that company makes money, it can pay some of that money out in the form of dividends. The more stock you own, the more dividends you'll get. The stock market is where people buy and sell shares of companies' stocks to each other. The value of the stock is what other people think it's worth and what they're willing to pay for it.

So if a company makes more money than they expected, there's a better chance that they'll pay higher dividends in the future, so people are willing to pay more for the stock, and the price goes up.

Another kind of security is bonds. A bond is when a company (or the government) borrows money from people. You lend some of your money to the company, and the company pays you interest for letting them borrow it. At the end, you get back your initial money that you loaned them (the bond matures). You can buy and sell bonds to other people, too.

Today, a lot of trading is done electronically (with fees every time you make a trade), and there are funds which are basically a whole bunch of stocks and/or bonds lumped together that you can buy as a package. This helps in diversification, which means you spread your money around so if one company goes bankrupt (enron), you don't lose everything.

I suggest doing research on Roth IRA's and checking out a site like vanguard for investing. You really should do research on your own, unless you're willing to pay someone else like a financial advisor to invest your money for you.

I personally believe everyone should have a Roth IRA and contribute the maximum they can, every year, and should invest aggressively (stocks) in their Roth if they're under age 30. But that's just my opinion...

Answer 3

If you make informed decisions and approach your penny stock investments with the same thoroughness that you’d use in your other investments, you too can unlock a whole lot of profit potential. Learn here https://tr.im/47mEO

It’s absolutely true that penny stock investors can make very quick gains. Synutra International, Inc. (NASDAQ: SYUT) is a great example of a penny stock. This dairy-based, nutritional-products company has jumped from a little Bulletin Board operation to a billion dollar corporation. The company finally graduated from Over-the-Counter status to the NASDAQ Stock Market bringing with it 113% gains in less than two months.

This happens all the time and it’s how some of the best investors in the world became the richest investors in the world. Buying some shares for pennies on the dollar and selling at $10 or $20 is possibly the fastest way from being a hobby investor to a super investor

Answer 4

Best to get started now with a good education. It can take years to learn how to be a successful investor. Over 80% of individual investors lose money in the stock market. Don't risk any money until you are confident you know what to do.

Since you're brand new I suggest you check out my free report, "5 Secrets You Must Know To Make Money In Stocks" at http://www.rightline.net

I've been actively investing for many years, and these "secrets" are just very important aspects of investing that I've learned the hard way. It should help you off to a quick start.

Good luck!

Answer 5

If you are investing in the stoack amrket, then you must be prepared to lose you money, it can happen, don't invest money that you cannot do without, it is a risk, sometimes a low one, but a risk all the same. Any advisor would say the same, or at least should. Perhpas you should try one of the investment portfolios, such as Allied Dunbar run, they have fund managers who keep on top of the changes to the stock market, and buy and sell at advantageous times, saves you all the work. There ar many, I quoted Allied Dunbar as I had my savings invested there,,and they made me money, but you should be prepared for a minimum of 5 years and better 10 years for the investment to run.

Answer 6

Never invest in something unless you understand what you are investing in.
There has to be a reason to buy and a reason to sell. If you don't understand the market you are in you are likely to get burnt or taken for a ride. The stock market is more likely to go down than up in the near future in my opinion. In which case you should avoid it. The best time to invest in the market is when everyone tells you not to. When everyone's telling you 'now is a good time look at me I made X last year' that is the time to get out. The best way to make money on the stock market is to run a fund. They charge 'management fees' on the funds you have invested. You take the risk and they take the reward. If the value of your holding goes up they take a cut. If it goes down they take a cut. The majority of so called managed funds do less well than the index (or whatever benchmark) they are supposed to be beating. They even think they've done well when the index goes down 10% but your investment only loses 5%. Its not management its herd mentality. You need to avoid the herds and start taking your own position on the future direction of things. If the markets look overvalued get out. Cash is king in a recession. Watch prices tumble and pick up some bargains. There are loads of books that will help you. I'll recommend some later but maybe you should look for an investment club near you. These are groups of amateurs who meet on a regular basis say once a month and contribute a regular sum for investing. Each member brings a unique perspective to the meetings from their everyday life or from research they have carried out since the last meeting. I've never been involved with one but they seem to get good press. I recommend it because it is informal and will give you some insight into the way the stock market works. Most people learn quicker through talking with a knowledgable person than through reading a book. Try the yahoo finance page for details about these groups. It might be under the questions section. Understanding the pages of the Financial Times (Pearson publishing) is a very good book to demistify the in and outs of the stock market. It's fairly hefty looking but in fact it has lots of illustrations. The Intelligent Investor by Benjamin Graham is considered by many to be a definitive text. He was Warren Buffet's mentor. It's aimed at the US market where things are a little different but most of the principles are the same. The main differences are that in the US reporting is done quarterly, in the UK half yearly. Also the way accounts are presented is different as well. And then there is the tax treatment of dividends. Stick to the UK until you become confident. Foreign stocks can rise considerably and you can still lose on the currency sliding. The Motley Fool is a no nonsense website. It is based in US but I think there is a UK version. Regardless of that most investors keep a watchful eye on the US for the reason that the state of the US economy has a huge impact on what happens in financial markets around the globe.
You'll find plenty of investment mags at the newsagents check them out and see which appeals.e.g. Investor's Chronicle It would also be a good idea to subscribe to the Economist magazine for a global perspective. They are far less biased than mainstream papers. Investment books may appear expensive but it's better to spend money arming yourself than being lazy and watching your hard earned cash disappear from poor decision making. Personally I can't understand why so many people spend so much time working and so little time educating themselves about investments. The sooner your income from investments overtakes your income from working the quicker you can retire! The reason I think markets will go down are the following: China is overproducing which depresses markets. Consumers in all the English speaking developed world have huge debts borrowed against a residential property bubble. This is especially so in US every man woman and child owes $160 000. Asian countries have been buying dollars to allow US consumers to carry this debt. Commodities are generally based in dollars but producers are starting to demand euros instead (various oil producing countries). At some point in the near future the bubble will burst the dollar will tumble and there will be turmoil in the world's financial system. This would be a good time to be sitting on the sidelines with cash but preferably bullion gold or silver. I tell you all this to recommend you take spend a few hours a week educating yourself while the stockmarket heads down. Then in a few months time you will have the confidence and knowledge to pick up some bargains.
There is no right or wrong way to invest. Each investor has their own strategy. The more you read the better idea you will have of which strategy suits you. This may be dictated by your lifestyle and how much time you can devote to monitoring the markets, your personality which will dictate what risk you are happy with and the simple thing of where your particular interest lies. Some swear by technical analysis (charts) others by fundamentals (the figures i.e. earnings, yields etc. A reliance on one and a confirmation from the other is possibly the best.
Have I scared you off. I hope not. It will prove rewarding if you stick at it. e-mail if you want some more advice
Cheers

Answer 7

Companies create pieces of ownership in their company. These are called SHARES. They do this so that people will like the company and what they do and invest in the future of that particular company.

Investors (like yourself) look at certain companies that they like and buy into the companies (by buying shares of stock). The company will 'reward' the 'owners' by one of two different ways.

1. By granting a dividend (quarterly) of a bit of money in 'thanks' for investing in the company.

2. By managing the company so that the stock price will go up.

Either way, you're making money on the company. The trick is to buy into a company when it is undervalued. That is, it's a good company but the stock price is low. It might be low because people don't know about the company or the company had lower earnings (profit) than others in the same business.

Go to Motley Fool and I'm sure there's some investment advise. (Yes, I know it's a silly name, but they have awesome advise)

good luck

Answer 8

When you buy shares of a stock, you are buying a tiny piece of a very large company, becoming its part-owner. In markets like the NYSE, shares trade among investors at prices set in an auction-like market. The share prices go up or down as a function of investor supply of and demand for shares; this supply/demand is a function of investor guesses about the future prospects for the company's success. As such, it takes into account all sorts of things, like company products and markets, industry events, and the national and global economy.

If you are a small investor, likely your best bet is to look at stock index mutual funds, and remember for most people, stock investing is best viewed as a long-term investment.

Answer 9

Penny stocks are loosely categorized companies with share prices of below $5 and with market caps of under $200 million. They are sometimes referred to as "the slot machines of the equity market" because of the money involved. There may be a good place for penny stocks in the portfolio of an experienced, advanced investor, however, if you follow this guide you will learn the most efficient strategies https://tr.im/ed075

Answer 10

What do you mean by " much anticipated and predicted crash... of stock market". Were you the one expecting this? Have you ever invested in the markets? If so, have you ever gained much? I do not get the rational for your question! Mr. You need to do some research! I think that today was just another "down" day in the markets caused by a long haul by the housing and credit crisis!