About Investing

Investing in the stock market is a way to make your money work for you. Knowing what to look for in a company is the best way to decide how and where to invest. This article will cover what to look for when investing in the stock market.

Function

The stock market is made up of companies that have put their shares of stock up for public auction. A company's stock represents a piece of the company, so when investors purchase stock, they're buying ownership in the company.
Stock purchases are handled by stockbrokers who work on the stock exchange. They buy and sell stocks on your behalf and earn commissions with each transaction. If a stock does well, shareholders earn profits on their investments, while a poorly performing stock means money lost.

Features

To invest in the stock market, you'll need to open up an investment account. Through this account, you'll place orders to either buy or sell shares of stock. Once an order is placed, the stockbroker can then place your bid on the stock exchange.
There are three large stock exchange markets in the United States. They are:
*New York Stock Exchange (NYSE)
*National Association of Securities Dealers (NASDAQ)
*American Stock Exchange (AMEX)
Nowadays, most trades are made online, and most company financial portfolios are online as well.

Identification

When setting up an investment account, there are three types of brokers/brokerage firms to choose from.
1. Full-service brokers are the most expensive, but their brokers can provide valuable insight into the ebbs and flows of the market. In some cases, these brokers may be biased toward their firm's vested interest in the market, so beware. These brokers work on commission.
2. Fee-based brokers specialize in gathering the investment information you'll need to decide on a stock purchase. These brokers work on a fee-based schedule.
3. Online discount brokers are the cheapest way to go, but they provide no advisory services. These brokers also work on commission.
Less experienced investors are better off going with a broker that provides advisory services, as there's a lot to learn when starting out. Online discount brokers are best left to the more experienced investor.

Considerations

When deciding what type of stock to buy, researching the company may save you money. Stock prices are determined by several market factors, some of which are:
*Company technical reports
*Third-party reports on a company's status
*The strength of the economy
*Current trade trends
*Current trends in spending
*Company financial reports
One definite piece of information you'll want is a company's market value, or capitalization value. This is calculated by multiplying the current stock price by the number of shares for sale the company has. Knowing this value and comparing it with similar companies will give you a fair market price estimate for the stock.

Warning

There are inherent risks when investing in the stock market. Market fluctuations and the health of the economy can take a toll on your stock portfolio when conditions are not favorable. It's always best to check on the status of your investments on a periodic basis to avoid unexpected surprises.
Economic risks and inflation are the areas you'll want to watch when investing in stocks. A sagging market doesn't necessitate pulling your money out, but a failing economy is a time to consider a serious reorganization of your investments. Inflation is more part of the economic cycle, and companies can adjust their prices accordingly.

Resources

• Bloomberg.com -- Market Data
• Stock Market Resources