Investing in stocks is a simple way to achieve part ownership in a business.
Investing in the stock market has become a much more popular and available investment opportunity for small investors with a moderate amount of funds available to invest. Growth in online brokers that allow individual investors the freedom and ease of investing on their own has contributed to more people investing in stocks in the early 21st century. Stock investing is a simple and hands-off approach to taking on a small ownership role in a business.
Stock Market Basics
A stock market is a financial marketplace where companies list shares of stock and investors buy and sell company shares hoping to profit. In the United States, the New York Stock Exchange (NYSE) is the large physical trading floor where investors meet for stock trading. However, most stock trades actually take place electronically through a huge network of globally connected banks and financial markets. Individual investors typically set up an account with a broker and either pay a broker to manage their investments, or trade on their own and pay a commission per transaction to the broker.
Stock Basics
Before achieving success in investing in the stock market, you need a basic understanding of why companies issue stock and how it works. Companies issue stock as a way to raise capital funding. An initial public offering (IPO), at which shares of ownership in a new public company are offered, is an alternate source of funding often preferred over loan financing by companies looking to grow. Once companies present their shares to the market at IPO, investors begin buying stock in hopes that the company, and therefore the share price, will grow.
Entering the Market
Before investing real money in the stock market, it is often a good idea to practice with a free practice account offered by some brokers and other financial websites. This is a good way to develop your strategies and to learn how investing works. Signing up for a new broker account is simple. Many online brokers offer accounts with opening deposits as low as $500 to $1,000. Trading commissions are usually available for less than $10 with many online brokers. Depending on the broker, you get access to certain trading and research tools with your account. You may have the option to pay a fee for advanced research tools as well.
Making Money
Understanding how you profit in stock trading is fairly simple for basic investments. Traditionally, you buy a stock on the belief that its price will rise over time as the company grows. Short-term investors expect a quick profit, while long-term investors believe a company's stock offers great long-term investment opportunities. Stock investors have various goals, ranging from long-term investing to steady income to fast growth. Once you understand the basics of stock investing, you can explore other types of stock investing preferred by some experienced investors, including margin trading, short investing and options trading.
