Before investing in stocks, you should know the functioning of the stock market. This article will serve as the beginner’s guide for stock market investing.
The Stock Market
The stock market is an organized system of buying and selling stocks and shares, and a place in which these transactions take place is called the stock market. The stock market deals with stocks of listed companies. In short, the stock market aims at the overall stocks sold and bought at stock markets. Before investing in the stock market, you need to know how it works.
How Stock Market Works?
Every investor is allowed in the stock market to make transactions with stocks, shares or bonds. In the stock market, small investor or a beginner investor to big traders everybody trades with each other. The price of a stock depends on the demand and supply of that particular stock. In stock markets, a middleman does the share dealing. This person is known as a share broker. The seller and the buyer mutually decide the price of the trade.
There is an open place in the stock market for trading and the process is known as open outcry. At this place, the traders gather and wildly shout their individual quotes or bids to sell their stock in the stock market. This is called "bidding" where the bidding price changes simultaneously and stops only when a bid is singled out as the highest.
There are other virtual trading places like the computer terminal to carry out the stock investing. Here, traders sitting on computer terminals bid through computers within a network.
Investing For Beginners
It must be kept in mind that beginners will not find it easy to make money at the stock exchange. If it were easy, everybody who's an investor would be a billionaire. The path to investing success takes time, serious study, disciplined efforts and most importantly, independent thinking.
The Stock Market Investing can be confusing, especially for the beginner. Getting some basic tips can help a beginning investor to make informed choices that fit their needs. Each person has a different goal when investing and that plays a big impact on how you invest. Investing is a rather touchy subject for most of the beginners because of the fact that they are intimidated by what they don't know about it. But investing in the stock market is probably not complex, as some financial advisors believe. In fact, it is something that almost anyone and everyone can do. With that intact in mind, following tips can be useful to get started in stock market.
1. Understand that there are no set rules for investing. There are no guarantees and no perfect way to invest.
2. Make informed or knowledgeable choices. Before investing in any way you should completely understand how your investment will work and all of the details of the transaction.
3. Make a simple plan to determine your goals and needs. This will help you to determine what investments to make and how much money to invest.
4. Look at the value of the stock instead of the price. Low cost stocks may be low for a reason. Look at the whole picture. See why the price is low and if there is a possibility it may rise.
5. Check the companies return on net worth. This is the profit after taxes divided by the net worth. It is important to see a trend of growing return on net worth.
6. Spread out your risk. You should not put all your money in high risk stocks. Try some lower risks and some higher risks. This is the best way to protect your money.
7. Understand the basics of stock prices. Prices move up or down depending on future projections.
8. Keep on learning and discovering new things and plans about investing. The Knowledge is a key to success.
These short tips can help a beginning investor start investing in the stock market. These tips are just the beginning to understanding investing and how to maximize your return but you have to keep on learning.
While investing in stocks, it is easy to become distracted and lose focus. Maybe your stock has been going down recently and you are afraid of losing any more money. Maybe you have found another stock you are interested in buying, but you need to sell your other stock first. Maybe you don't like the ups and downs associated with investing in an individual stock. In such a scenario, these simple questions might come handy while investing in the stocks:
1. Is the money I invested "extra" money that I can afford to lose or at least hold on to through the rough times?
2. Do I have additional money to invest if another opportunity arises or am I locked into one stock?
3. Should I still buy the stock today?
4. Should I consider investing in something that has less volatile price movements?
By Jayashree Pakhare
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