Basics of Stock Market Investing
The stock market facilitates the buying and selling of company stock. Company stock refers to a share in any company’s profits. Being a fiscal market, the stock market is volatile and highly sensitive to fluctuation in stock value. The arena is definitely not only meant for bulls and bears…
There are many small players that join the bandwagon of stock market investors every day. They trade successfully, armed with research and knowledge. No different from any other trading ground, the stock market too, can be conquered. The transactions and the outcome of the market are unique in a sense that they can be conducted via online trading or in real time. It is very important though to know how to start investing in the stock market before joining the fray.
Some Stock Market References:
Stock: Stock refers to a share in the profit. Stock trading involves ‘buying into ownership’ of a company. Stock is also referred to as equity or shares.
Investor: An investor is the owner of a particular company’s stock. He has ‘claim’, in however small a proportion, to all company assets. The investor shares the company’s earnings.
Stock certificate: The stock certificate represents the stock purchased and defines the return on investment. Offline, the certificate is a fancy document, while online it is a display available at a click on the mouse.
Dividend: This is a distribution of the owned portion of a company’s earnings. It is commonly quoted in terms of a currency amount per share.
Common stock: Common stock represents ownership in a company and claim on a portion of profits. It yields higher returns in the long run.
Preferred stock: It guarantees a fixed dividend forever. In event of liquidation, preferred stock continues to be paid off.
How to Start Investing in the Stock Market:
Assimilate information: The stock market is just like any other trading arena. It is unique in application and hence, it is very important to get yourself educated on the basics and the terms and abbreviations used. You should use every resource to get acquainted with the roles of other players on the field and understand how one enriches the other. Set time aside to read and research about stocks, stock exchange and market trends. Inquire about seminars, symposiums and online resources.
Set financial goals: Like everything else in life, stock investing too can lead to ‘aimless wandering’ if there is no short and long term financial goal in place. You could look up any of the stock-picking strategies like options trading that are easily accessible to set your own goals.
Invest in market-specific knowledge: Indulge in preliminary reading of annual and quarterly reports. Look up dedicated documents accessible from the Securities and Exchange Commission. Once you get acquainted with the lingo and analysis, you will be better equipped to meet the market challenges.
Invest small and on familiar turf: It is very important to invest small in the beginning. Like any other fiscal arena, don’t put all the eggs in one basket. Buy stocks to diversify. Invest primarily, in those companies that you are familiar with. This will add to your level of confidence while interacting within the ‘ring’.
Compare and analyze research: It is important to conduct stock research and assimilate and analyze the performance of successful companies dealing in mutual-funds and stock. The profits could be yours if you follow similar trends and identify their success strategy.
Study the charts: Compare and study the charts relevant to your investment in the stock market. This enables you to home your investment skills by identifying upscale industries and major foreign investments.
Focus on the long term financial goal: Achieve short term, but don’t let the long term financial goal out of sight. In order to achieve both, it is important to indulge in goal setting and be patient with stocks that are slow in making it to the charts and save on commissions. The latter can be achieved by making optimum use of discount brokerages.
The stock market can be a roller-coaster ride if you don’t tread with caution. Use the three R’s – Research, Review and Revise, for success on this turf.
| By Gaynor Borade Published: 2/2/2009 |
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