Trading in the stock market. It’s something of a mysterious, elusive beast to most and to others, it’s one of the greatest ways to make huge profits quickly and efficiently. In many ways it is like the ultimate gamble. By investing poorly, investors can lose large sums of money in the blink of an eye. And horror stories such as these tend to make the average citizen fear the stock market. However, if you have a good idea of how the market works, you should do fine. Here are a few basic rules on the stock market that should help you start investing.
What are stocks?
Stocks, in essence, are a part of a company. If you purchase a stock, you own a piece of whatever company’s stock you bought.
What are shares?
Shares are a more specific version of a stock. Shares are still technically stocks, but they are the stock of a particular company. For example, if I were to tell you that I owned stocks, I would be saying that I generally own stocks of multiple companies; and if you were to ask me what stocks I own, I would say that I own shares of specific companies, like Apple or Microsoft or Toyota.
What is a Stock Exchange?
Stock exchanges used to look like Black Friday sales at a department store—coincidentally, that is the best way to describe a stock exchange—with stock brokers running around, shouting demands back and forth; it was a mad house. The Nasdaq Stock Market is an incredibly popular stock exchange, so let’s take that for example. At Nasdaq, or any of the other stock exchanges around the world, stocks are purchased and sold. Much like a department store, there are multiple different stocks from different companies, ranging from large to medium. Stock exchanges are where the bulk of investment activity takes place.
But Why Exchange Stock?
Knowing the basic information is important, but none of it matters if you don’t understand why you’re doing it in the first place. So, essentially, investors buy and sell stocks, which makes up the market. The buying and selling of this stock determines a company’s value on the market. Stocks fluctuate, which is why the stock market is a gamble. Depending on current trends and company situations, a stock can jump to soaring heights or fall to rock bottom lows. For example, usually, when Apple unveils a new iPhone, their stock tends to rise because buyers know that the company will sell millions of phones, gaining Apple millions of dollars. Then, you can sell your shares of stock to someone who is willing to buy them in order to make a profit. However, it is far easier said than done, because predicting those fluctuations is almost impossible. But if done right, it can be a huge boon.
Buying and selling stocks can be a tremendous investment and a wise way to make money. And the process is far more complex than what I’ve described. These are just the bare basics of the stock market. For more information, and more in-depth knowledge of the market, sites like Investopedia or MarketWatch are perfect. Good luck and happy selling!