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The Basics of the Stock Market
by Edward Bryce
Published on this site: October 3rd, 2006 - See
more articles from this month
Stocks are the basic building block of the stock market. A stock represents
partial ownership of a company - the smallest share possible. Companys
issues stocks to raise capital and investors who buy stock are actually
buying a portion of the company. Ownership, even a small share, gives
investors rights to a say in how the company is run and a share in the
profits (if any). While stocks give owners certain rights, they do not
carry obligation in case the company defaults or faces a lawsuit. Worse
comes to worse, the stock becomes worth absolutely nothing but thats where
the liability ends - investors will never actually owe money if the company
goes bankrupt.
- Companies Give Stocks to Raise Money
In most cases, the company needs money to expand or to acquire new
properties. Each stock issue is limited to a certain number of shares,
and when they are issued they are given a par value. The value of a
companys stock is often directly related to it's market share.
- Buy Low, Sell High
If you are going to buy stocks, make sure you invest in a company
that you believe will be growing soon. Investors who acquire stock in
a new company are taking more of a risk than buying shares of well-established
companies but the potential gain is much greater. For example, those
who invested in Microsoft and held onto them are quite wealthy today.
- How is Trade Done?
Trade actually happens at stock exchanges such as the NYSE or NASDAQ.
Only reputable, and listed, companies can have shares bought, sold,
or traded. As an investor, you will need a broker to make your transactions
for you. You can tell your broker to sell once the stock reaches a certain
price or simply to sell what the market will bear. Your broker will
get a commission for the sale.
- Why Stocks Over Other Investments?
- Stocks grow over time
- Stocks give you rights to vote as a shareholder
- Dividends give you money once or twice a year
- You will never owe money if the company goes bankrupt
- Can earn more money than any other savings investment
Edward Bryce: For more great stock market related articles and
resources check out http://stockinformer.info
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