Introduction to the stock market
The stock market is constantly changing every second of every day. These changes determine how much the investor will gain or lose. The uneasiness of the market can make many individuals reluctant to take part in the world of investing. There are thousands of “investment horror stories” which shed light on the misfortunes of investors who lose 50% of their portfolio value, or worse. The stock market is nothing but a shark-filled pool of risk. Yet, while making decisions regarding one’s finance can be deemed as scary, with enough research and knowledge on the market it is very possible to benefit from a stock’s value.
To begin understanding the stock market, it is crucial to understand some key concepts and terms. For starters, the word “stock.” This simple five-letter word determines the fate of many personal and national economies. A stock is a share of any company that is internationally publicly traded. When one purchases a stock, they gain partial ownership equity in the firm, which allows those shareholders a residual gain on corporate earnings in the form of capital gains and dividends. A dividend is money from businesses given back to shareholders, which is how individuals can gain wealth from the market. The main idea behind the stock market is, you must have money to make money. Anyone interested in joining the havoc of the stock market must have sufficient funds to purchase a stock.
Depending on what company the stock resonates with, will determine how much investors have to pay for it. Loads of people with a lower economic status can see the stock market as a way to “get rich quick,” which is not necessarily true. Those eager to make a large sum of money with little-to-no money tend to fall into the sticky trap of penny stocks. A penny stock is a stock sold at under a dollar. Usually, the companies these stocks belong to are irrelevant and unreliable. While there are some success stories regarding the purchase of penny stocks, the majority of investors who purchase penny stocks are being scammed by unreliable brokers.
A stock market is a place where individual investors and institutional investors can come together to buy and sell shares in a public venue. In today's setting, there are countless online marketplaces where one can purchase a share of a company by tapping on the screen of one’s phone. Apps like “Robinhood,” “Webull,” and “Tradestation” all serve as an electronic marketplace purchasing a stock more simple and efficient.
How is a stock's price determined? I am sure that is a question that commonly arises in the head of many learning investors. A company’s worth is often referred to as Market Capitalization; “Market Cap.” The stock price is the relative and proportional value of a company’s worth, so it only represents a percentage change in a company’s market cap. Market cap can be determined by multiplying the company’s stock price by the number of shares outstanding. Any slight shifts in a stock price can raise hell for some investors because the change in price results in an equal percentage change in a company’s market cap.
Those were just a few minor terms tossed around in the deranged world of the stock exchange. Becoming an investor can, and will most likely be a stressful process, but with the right resources, knowledge, and guidance there should be no reason as to why one can’t find success in the stock market.