Basic Facts About The Stock Market

Basic Facts about the Stock Market

by

Arkaitz Arteaga

You cant go far in todays world without hearing something about the stock market. Unfortunately, the media take for granted that all of us in the audience understand the stock market. The good news if you dont have a clue how to interpret all of those stock symbols running in the ticker at the bottom of your screen youre not alone.

But thats about to change. Below is an overview of some of things you need to know about the stock market. Stock Market Background The purpose of the stock market is to allow businesses to grow and to let investors have a way of earning money. Let me give you an example on a very small scale. Your child opens up a lemonade stand in your neighborhood for a week. She earns a decent profit and decides to open up a second stand at her grandparents house. Unfortunately, she doesnt have enough money for the expansion. Other kids could pitch to cover the costs and receive a portion of the profits she makes. Thats exactly what happens every day in the stock markets all over the world with thousands of different companies and millions of stockholders. how to invest in the Market, Stock Purchasing Guidelines If you want to purchase stocks, youll want to form a relationship with a stock trader. These are individuals who work in the stock exchange, through virtual stock exchanges, or with trading software. Youll give them your money, tell them what you want to buy, and theyll complete the transaction on your behalf. For this service, they do receive a commission on the transactions. Some people also use their traders for stock advice. However, you can make your own choices about which stock to buy. Obviously, the secret to making money is to purchase stock at a lower price and sell it at a higher price. That may sound overly simplistic but its this thinking that drives all investors. Another idea to understand is supply and demand because this affects the prices in the market; stock prices go up and down based on this basic principles. For example, if lots of investors realize that big is happening for a company they may all decide to purchase stock in that company. That decision increases demand for that stock thus raising the price. On the other hand, if the same company has a poor financial quarter many investors may start selling off stock which means the supply is increasing and the price drops. Earning Money from stocks Another question you might have is how you earn money from the stocks. As a stockholder, you receive a portion of the companys profits. When the company determines their earnings and deduct all of their expenses, they are left with their profit. That profit is divided by the number of stockholders and each receives a portion. For example, if you own 1% of a company which generated $2 million in profit then you would earn $20,000 for your stock. If the company doesnt make any profits, however, you dont receive anything.

Arkaitz Arteaga –

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Basic Facts about the Stock Market