How to understand the basics of Stock Market investing - easy

Difficulty: Moderate

Instructions

Things You'll Need:

Newspapers
Internet
Television

Step 1

Market investing

First, sit down to listen to learn how the stock market works. Watch a couple of the television shows that cover the stock market on Bloomberg, CNBC, Fox or CNN and local networks. Try to avoid listening to particular stock recommendations, instead use the information from these shows to learn how the stock market works. Know what's going on with the economy and also in particular industrial or financial sectors. Pay attention to the companies that are in the news and understand why they are making the news. Following the financial news is the best way to start learning how the stock market works.
Step 2

Market investing

Second, sit down to read. Learn how to read the stock market. Read business magazines such as Money, Forbes and Baron's. These magazines have been around for a very long time and their business articles are very informative. Again try to avoid listening to particular stock recommendations and just learn how the stock market works. Also, read the business sections of the local papers to learn how the stock market works.
Step 3

Market investing

Third, go to the listings for the New York Stock Exchange and find a stock that you are familiar with, such as Disney, McDonald's, Exxon. Find out the Ticker symbol - this is the three letter symbol for stocks listed in the NY Stock Exchange. Alternatively, you can use Yahoo or Google Finance to find out the symbol for the stock you are interested in. Track the price of the stock and the related news for one week. Following a company is another way to learn how the stock market works and how your company fits in the overall picture. This price represents the price you will pay for one share of the stock at the time of purchase. The one year price low and the one year price high for the stock are also listed. The Internet - Yahoo Finance and Google are great resources to learn how the stock market works.
Step 4

Market investing

Fourth, once you have done sufficient research and feel comfortable becoming a shareholder is easy. However, before you invest in the stock market develop an investment plan. Investing without a plan is like gambling in with your money. By buying shares of stock you become a shareholder of the corporation. Generally, as regular investors we buy the common stock of the corporation. The shares are traded in what is called the secondary market. This is the market that investors watch on the news. This is also the market that is measured as the Dow Industrial or the Nasdaq Index or the New York Stock Exchange index.
Step 5

Market investing

Fifth, learn how the shares of stock are priced by the market. Simply put the stock market is like a supermarket. If there is a product that is very popular and everyone wants it the price goes up; and if nobody wants it the price goes down. It also depends on how much of the product is for sale, the more of the product the cheaper it is. This is a very intuitive way of learning how the shares of stock are priced, there are of course complicated mathematical formulas used.
Step 6

Market investing

Sixth, learn how to earn a profit when you invest in the stock market. When you buy stocks, you can earn a return in two ways. First, you may receive dividends, this means you share in the company's profit. The second way and the most profitable is when the company's stock does well and it goes up in value over time. You can sell the stock for more than you pay for and make a profit on your investment.
Step 7

Market investing

Finally, understands that there are risks involved when investing in the stock market. Be aware of the risks - stocks have the potential to give you a much higher return than say a bank account or a bond. However, there is also a risk when you buy stocks - their value can drop and it's possible to lose your principal. This is why having an investment plan as mentioned earlier is very important.

Comments

LisaBud said

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on 1/15/2009 Great straightforward and easy-to-do steps that really work. This is exactly how I learned about the stock market 15 years ago and it's still the best way today!