Stock market help....PLEASE!?

Question

Hi. ok well I want to invest in the stock market but I am completely clueless as to how it works. I have read up on some parts of it but all Idid was confuse myself. I am hoping that someone here can tell me how a stock market works, how you make money from it(do you HAVE to sell the stock) and which ones are smart to invest in. I have a few I'm thinking of investing in but I just need a brief tutorial as to how it works. Please and Thank you.

Answer 1

Suppose someone points you to the S&P500, which along with the Dow Jones Industrials average are the two most quoted measures of stock market performance each business day.

The Standard & Poors (S&P) company, along with Dow Jones (which owns the Wall Street Journal), are the two most authoritative companies on business research. The S&P 500 are a listing of the 500 biggest most likely to stay profitable.

Then suppose you told yourself, "I want to invest in the most profitable companies." So sorting the list at the BusinessWeek site, the most profitable of those companies. Clicking on the profits column to sort them, we take the short list: XOM (Exxon Mobil), Citigroup (C), and General Electric (GE). Recent prices for those stocks was $77.20, $49.38, and $35.28 per share, respectively. Over the last year, these three companies reported profits over $79 billion, so you are interested in getting a piece of that action.

Stocks generally sell in blocks of 100 shares, so buying a hundred share each of these three would be about $16,186 (assuming you get the same prices as they closed at, for the sake of illustration because you can't make that assumption), plus the price of bokerage fees. I use Scottrade, and that is three trades costing $7 each, or $21, so the total is $16,207.

Then you just sit on it, maybe even forget it. Investing is a specific term, you are putting your money into something to work for 12 months or more. If you sell it before then, it becomes a speculation and you are taxed on the profits (assuming you sell at a profit, many folks don't, something to remember) at a different rate--your personal income rate, otherwise it is taxed at a lower capital gains rate. In the meanwhile you will probably get $125 dividend from ExxonMobil, as well as $191 from Citigroup and $100 from GE. If nothing else happens, you will get some $416 in these profits paid out to stockholders, something like about 2.57 percent return on the money you paid out. Then you compare the money in the bank and see whether that takes some of the sting out of not letting your bank pay you interest. Meanwhile, the companies earned something like $420 more on your investment than they paid you, so you aren't robbing the store by taking a dividend.

Suppose, instead, you only had, say, $2,000, like you just opened an IRA. The same choices would have come out this way: 2,000 - 21 (brokerage fees) = $1979. Say you round it to $650 each, you buy: 8 shares of XOM, 13 shares of C, and 18 shares of GE, $1894.58 (plus 21 for brokerage fees), costing $1915.58, leaving you around $84.42.

What interests you? Is there a company that you admire? Do you want to be a part of some movement in business? Just change the choices and plug in your real numbers and go be part of it.

Answer 2

Some very simple guidance: -
1. Yes, you have to sell. You must, at some point, realize your profit.

2. Obviously you want to buy stocks likely to move up over time. Stock prices go up for only a few reasons. The "flip" answer many will give you as to why a stock is increasing in price is "more buyers than sellers". True, but useless advice. The real reasons are - profits are expected to rise or the company's assets are likely worth more than the current stock price. That's about it.

3. Here's the hard part. You need good information about which company's profits may increase or whose assets seem undervalued. As a single individual it's basically impossible for you to get information not available to everyone else. What you can try to do is "ride some coat tails". What I mean is - find a successful investor and follow what he/she does. If you don't have a rich uncle look up the top investments of mutual funds with good track records. Easy to do, but too long to explain here.

4. You have to know your own tolerance for risk. If you can't afford to lose all, or a good part of, your investment - stay out of the stock market, or find a very conservative mutual fund. If you have a high risk tolerance choose a few of the investments selected by good mutual funds.

5. Put your eggs in several baskets. Obviously if you only have a very small amount of money you will be very limited because the costs of buying (and later selling) shares will eat up your profit on small investments.

6. Watch & learn. Read voraciously. Be always humble and be especially careful if you are lucky with your first investment.

Good luck!

Answer 3

You ask a question that noone can answer in this tiny space. It is one way to explain how it works, and another to explain how to make money. There are more strategies than you can count. So, I'll say a few things.

First, you HAVE to sell the stock to make money. Not only do you have to sell it higher than where you bought it but it has to be high enough to cover all the commission fees you paid to buy and to sell. If you don't sell a stock that is higher your account will show that you have more value than when you started. But, that's not making money. The money is not your until you sell. Over time of investing you will have to learn when to sell and let run. And, you'll also have to learn when to sell to stop bleeding money as a stock you own tumbles. It happens.

It is precisely the last comment that I want to tell you NEVER invest money you don't mind losing. And, I mean losing all. At some point, you'll learn how to not lose it all. But, sense you know nothing I have to tell you that.

Also, do not invest money, you'll need in 5 years.

And, if you dont' own a house, start saving for that not via investing, and after you've purchased one, you can think about investing.

And, finally, to do any investing you'll need a brokerage account. I recommend Scottrade (www.scottrade.com) to newbies because it is low on commissions. It also have mutual funds that are baskets of stocks managed by a professional. These are good vehicles for newbies before buying stocks.

Good luck and keep reading.

Answer 4

You can join some online trading companies like http://www.tdameritrade.com, http://www.etrade.com, http://www.fidelity.com, or http://www.scottrade.com. I'm with TD Ameritrade and they have been great. When you go to the site they have some forms you can download and print out to mail in and open an account.. Last time I checked you need about $2000 to open an account. You can connect your Trading Account with your Checking Account to make cash transfers electronically. Once you open an account you can start buying stocks. I am a member of http://www.marketedge.com web site. It is pretty good about stock recommendations.
To buy a stock you click on the buy command in the web site and type in the company's stock name. For example, if you want to buy Microsoft stock then type in MSFT. Stocks come in shares. According to http://finance.yahoo.com, typing in MSFT in the stock quote box, the current price per share of Microsoft stock is $29.12. If you have $2000 in your stock account, then you divide $1980 by $29.12. You can buy about 67 shares. The stock trading site takes out a fee per transaction. That is how they make their money, which is why I said use $1980 and not the whole amount. You can place a limit on what you are willing to pay for the stock per share or just go with the market price. If you are a short term trader you will wait several months or a year or more to sell the stock. If the stock price goes up to say, $35.00 per share and then you sell, the proceeds from the stock are $2345. Subtract your initial investment of $1951.04 for 67 shares, and the broker's fees from buying and selling, about $28 possibly - you have gained about $365 dollars. You will need to pay taxes on this amount. The tax rate is differerent for however long you hold the stock. Some traders do multiple trades in one day. This is a daytrader.
On the other hand the stock could fall easily to $24, and if the company hits rough waters even lower.
If you are a short term trader then:
It would be wise to put sell stops on your trades. This will automatically sell your stock if it falls below a certain price.
If you are a long term trader, don't be sqeamish in down turns. Also, as a long time trader, buy companies with a track record for making money, like Apple Computer, Microsoft, Disney, Ebay, Chevron and the Cheese Cake Factory.
Don't expect great riches, but you may make a little more return than what the bank pays on a CD or savings account. Or you can simply lose your money. You are not required to sell your stock, though sometimes the stockholders vote to sell the company, in which case the stock will be sold automatically and you will get the money.

Answer 5

Every stock has a cycle. It has a low and high point. You make money if you buy when it is low and sell when it reaches it's top price for the cycle. If you want to build wealth, most investors believe it is best to buy a stock and hold on to it for several years. Stocks go up and down. Looking at the long term is much less stressful for most people. When more people sell stock than buy, the value goes down. When more buy, then the price tends to go up. Some say that it is based upon price/earnings to assets. The only problem with that thinking is that some stocks do well without paying dividends or showing profits.

If you want to invest yourself, you may want to subscribe to Investors Business Daily or the Wall Street Journal. I prefer the Investors Business Daily. They will provide information about stocks and help you to better understand how the market works. If you are interested in a stock, check the 52 week high and low as well as the last 30 days. Watch the stock for a few weeks. You should notice a cycle. You want to buy it when it reaches the low price cycle.

If you don't feel comfortable investing yourself, then you may want to invest in a good no load mutual fund and let them put your money in a pool with other investors. They take everyone's money and invest it in a number of investment vehicles, including stocks, bonds, gold, silver or other types of products. Most invest heavily in stocks, both high and low risk. Some investors realize a much higher return with a mutual fund than on their own.

Some brokerage houses have booklets on various types of ways in which you can invest, including puts, calls, stocks, futures, commodities, margins, etc., You need to gather as much information to educate yourself as you can before investing.

Answer 6

I've got a $50,000 portfolio (2nd link) whose management is basically my second job. This forum is far too inadequate to tell you all the workings of the stock market, and how to win at the 'game'. If you don't want to manage your portfolio yourself, because of a lack of knowledge, or just don't have the time, you can buy a mutual fund, which is a portfolio of stocks invested in by many people, and managed by a professional stock trader, who has lots of experience, education, and should be certified.

Then there's the people like me. The individual investor. I'm a numbers cruncher by heart, so I love working with all the ratios, and numbers associated with evaluating each company on their 'fundamentals', or how their business performs. I choose to actively manage my portfolio. To be able to do this, you need to be informed about what your doing. By no means should you enter the market if you know nothing about.

First, you need to educate yourself. Look at the link below. The first one will tell the basics about the stock market.

Second, you will need develop a strategy for buying and selling. Strategy comes in when you must decide when to sell and when to buy. Stock prices fluctuate non-stop throughout the trading day, so one must know the right time when to sell or buy a stock, and what. Many many many things go into it, and you should understand these things before you jump into the fray.

No one can simply tell you how to invest in the stock market. Every strategy is different. There is no 'holy grail' strategy. So, educate yourself, then go from there.

Answer 7

Books:

The super classic is Reminiscences of a Stock Operator by Edwin Lefèvre, the story of one of the biggest stock traders ever.

A Random Walk Down Wall Street by Burton G. Malkiel is also a classic.

The Millionaire Mind by Thomas Stanley is a huge classic, really amazing.

Don't forget The Cashflow Quadrant and Rich Dad Poor Dad by Robert Kiyosaki

Technical Analysis of Stocks and Commodities, from Martin Pring, is the best for technical stuff.

You can learn a lot by reading interviews of successful investors in Jack Schwager's books (Market Wizards I & II and others).

Jack Bernstein's The Investor Quotient is very, very good.


Web:

See http://www.equis.com/customer/resources/...
for technical analysis formulas.

See http://www.investopedia.com/, an online encyclopedia - very good.

See also http://invest-faq.com/

See http://www.prophet.net for online charts

See http://finance.yahoo.com/ - the best info

But the best website is: http://www.thekirkreport.com

Answer 8

You seem very inexperienced. This is not a bad thing, however if you have no idea don't just guess without going to do your homework. Read the financial annual and quarterly reports.

I would mostly suggest going to see a financial planner, concider investing in mutual funds which offer good balanced stocks,managed by many people for you.

Answer 9

You sound to green to go it alone. Depending on how much money you have to lose or gain would depend on the advise. I have lost 100's of thousand doing it myself. I am just an average American who was trying to do it on my own for years. Lost about everything. Now I work with a professional. That would be my suggestion to you, get profession help.

Answer 10

Seek professional help if you don't understand. Why not get a few books starting with something like: http://www.dummies.com/WileyCDA/DummiesTitle/productCd-0764556894.html