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A Beginner’s Introduction to Stock Market

Now, what is the stock market? This article provides an introduction to the stock market. A stock market is essentially like any other market, a place to buy and sell something, which in this case are stocks. Stocks are instruments of ownership in a company.

 

A Beginner’s Introduction to Stock Market

In other words owning stocks in any corporation means you own part of that organization. Owning stock generally gives you a right to vote on important decisions in that company. A stock market works on the same economic principle of supply and demand that any other market works on.

When demand is high and supply is limited the price of stocks goes up and when demand is low and stocks are plenty it drives down the price of stocks. The process of stock is an important indicator of a company’s viability. If stocks go up consistently over a long period of time say a year or two then the stock is generally deemed as a good investment.

Now when you understand the introduction to the stock market then you will realize that people get into stocks for two reasons, to either maintain their wealth or to increase their wealth. If you’re like most people then you are of the latter category as you want to make money by investing in stock. The way to earn money through stock is through dividends.

Companies pay out dividends to its stock holders as a way of thanking them for investing in the company. Dividends are a percentage of the profit that the company has earned. Since you are a part owner of the company through your stock investment you are entitled to a part of the earnings.

Your dividends amount generally represents the value of the stock you hold in the company. Stock market investing is a long term game plan so be ready to have a long term investment strategy. Short term investing that is anything less than a year is called speculating and is considered risky.

Long term investing is better because stocks tend to fluctuate sometimes wildly on a daily basis but become stable over time and are easier to spot over a long term. Introduction to the stock market helps you in market research which is vital for understanding how the stock market functions and once you understand how it functions then making money from the stock market can become a great way of earning income for the years to come.

1) Owning stocks in any corporation means you own part of that organization.

2) The way to earn money through stock is through dividends

3) When demand is high and supply is limited the price of stocks goes up and when demand is low and stocks are plenty it drives down the price of stocks.

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Professor Savings Finance Writer
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