Today, most Americans invest in the stock market as way to grow and increase their savings and retirement. More than 50% of all Americans have money invested in stocks, bonds, or mutual funds. Over the last few years, the stock market has outperformed all other investment opportunities. The beginners guide to investing in stock outlines the basic principles of investment. |
• A stock is a share in the ownership of the company and represents the investors claim on potential earnings and assets. As investors purchase more stock, their stake in the company, and the potential for higher earnings, grow. • Profits are often paid out as dividends, and the more stock owned, the more dividends reaped. • Many investors purchase stock as part of a long-term wealth management strategy. Other investors are focused on short term gains. • Beginning stock investors know to “buy low” and “sell high”, but more sophisticated investors have a strategy that will help them ride out the market volatility for long term wealth. • Stock prices fluctuate throughout the day. This is a result of supply and demand as practiced by the free market economy. Share prices changes because both the demand and supply of those shares change. If more people want to buy a company’s stock, the price goes up. If more people are selling the stock, the stock price falls. The price of a stock is reflective of what the market feels the company is worth. Investors and analysts watch the stock’s movement and try to predict the best times to buy and sell the shares.
Beginning investors should study a company’s earnings before investing. The earnings are the profit a company makes. Companies traded on Wall Street (via a stock exchange) are required to report their earnings quarterly to the Securities and Exchange Commission (SEC). If a company is making more money than expected, you can count on the stock price to increase. Subsequently, if the company made less money than projected, the stock price will drop.
Many investors buy stock using a brokerage firm. Full service brokerage firms offer advice and manage investor’s portfolio. They charge higher fees than discount and online brokerage firms. Discount firms do not provide advice, research or personalized customer service. Online brokerage sites allow anyone with a bank account and some money to invest in the stock market. There are a number of reputable on-line sites that can help investors research the earnings history and potential of any company The financial media, whether online or on television can also provide expert advice and analysis about the stock market.
The main points of beginning guide to investing in stocks are simple. Buy stocks when the prices are low. Determine if your investment strategy is designed for long-term growth or short-term capital gains. Identify when you feel you should cut your losses and when you feel you can ride the volatility of the market. Stay informed about your portfolio and make decisions accordingly. Beginning stock investors should stay calm and continue to invest where they feel comfortable.
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