Stock Market Basics For Newbies

If there is an old and tried investment, stock market stands at the center. It is one of the best investment ideas around. Just carrying out some research will show you people are making thousands of dollars every month, others every day. You can make it one of your best investments in 2010. However, prior to putting your funds into stock, understand the basics that govern this market. Learning amicable stock market basics will definitely put one in a level many only wish for. In fact, any people are doing poorly in the stock market because of poor mastery of the basics.

If you want to learn to trade stocks like a pro, don’t ignore the basic knowledge. Stock is basically an ownership stake in an organization or company. Companies raise funds by floating shares to their investors. By owning stocks of a particular company, you are entitled to the profits of that company which is termed as dividends and also a fair share of risks as well. Success of the company leads to your own. To increase a percentage of ownership, you only need to buy more stock. Don’t forget owning a company’s stock does not mean you become a part of the everyday staff; nevertheless, shareholders have a chance to elect such people by voting in annual general meeting.

To know how to find the best investments in the stock market, understand the two stock types, preferred and common. The most traded stock and in abundance is what is known as common stock. It is also what most investors refer to when they talk of ‘stock’. Apart from giving one a percentage of company ownership, it has no special benefits.

On the other hand, preferred stock has many benefits. The stakeholders who hold preferred stock might not get voting rights but they mostly get their dividends fixed in the entire life of a particular company. For common stockholders, theirs is just an occasion dividend but hardly equals what a preferred stockholder gets. When a company is under liquidation, the only stockholder with few worries is one holding preferred stocks, since in debt repayment they get their percentage first. They are better placed to receive their funds back in case a company has limited money for debt repayment.

As you learn to trade stocks and understand the stock market basics, don’t forget demand and supply makes the price of stocks to either shoot up or go down. The price goes up if there are so many people to buy while the shares are less. If there are many investors unloading their stock with few buyers available, price shoots down.

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