Stock Market Crash Course

Stock market is like a market place for businessmen. In a public market, goods are sold to the public. In a stock market however, stocks are sold to the public. Company stocks are sold in the form of shares. The more shares a person buys in a company, the higher his or her stocks are for that particular company.

The stock market consists of the primary market and the secondary market. Primary market is where companies raise finances for their operating expenses by selling shares to investors. The secondary are investors who buy and sell those shares to other investors. Their decisions are constantly based on changing market conditions.

A stock market is like an auction house. It is a systematic method of buying and selling. In a stock market though, it is a common sight to see people shouting and gesturing at one another.

The buying and selling of stocks begins in different places. If a person decides to purchase stocks in a particular company, a broker is contacted. This broker in turn takes the money of the investor and coordinates with a floor broker at the stock exchange. Usually a floor broker works for the broker or with the company selling the stocks.

At the stock exchange, floor brokers purchase the stock that the investor wants. When a deal is consummated, it is made known to a broker and the investor becomes a stockholder of the company.

That investor may decide to sell the stock. This is usually done when the price per share has gone up. This entails profit for the investor. For example, if a person bought 100 shares at $20.00 per share and the price increased to $25.00, selling those 100 shares results in $500.00 profit.

The economic principle of supply and demand is the driving force of the stock market. The number of shares of stocks that are open to the public dictates the supply and the number of shares that investors want affects the demand.

Movement of stocks in a certain market causes the constant changes in the prices of stocks.

For example, if most people believe that the economy is growing, they would buy more stocks. But if the economy is in a downfall, their tendency is to sell their stocks.

Many businessmen choose to make a long term investment in the stock market. There are instances where stocks decrease in value causing a stockholder to lose money. The stock market does not guarantee profit. The better a person is in reacting to the changes at the stock exchange; the better his chances are for profit.

Risks Of A Stock Market

Stock market risks: Is my money really worth it?

So, finally, you have your money you can call your own. Naturally, you want to see your money grow. Saving your money in a bank doesn't entice you, seeing it offer too little growth potential. You want something that gives a little more risk, with the hopes of having a much larger financial return. You turn to the stock market.

But wait! Are the risks involved in investing in the stock market worth my money? Investing is a good tool to increase you money, but you have to keep an open mind and know what to look for.

Needless to say, investing in stocks is a risky business. There are some risks that fortunately, you can control.

For example, you must guard against investing in "hot" stocks. True, some get wealthy in investing in "hot" stocks such as the "dot-com" bubble in the 1990s, but when the initial buzz around these stocks begin to slide, so does your investment. Once they fall, they really fall hard in a short period of time. This includes your money and others like you who invested in these stocks. If you really need to invest in these stocks, you have to keep a constant eye on them and try to sell them when they start to level off or drop.

To avoid such risks, you must diversify your portfolio. Basically, it means buying a little bit of a lot of different types of stocks and bonds. In that way, if one stock gets down, another one of your stock might be up and will help you recover some of your losses. It is a good idea to have some stocks in the technology sector, telecommunications, biomedical, and consumer corporations. In time, you could add your portfolio with precious metal and diamond indexes, and some general investment funds.

There are also companies that offer "safety stocks". It will be a sound decision to have several shares of companies such as this in your portfolio. This is because such stocks rarely fluctuate and most often offer a slow and steady growth, thus giving you an assurance in your investments.

Do not rely on tips saying that this stock is "going to be big" and the like. These tips are often unfounded, and these stocks are almost worthless. Investing in these stocks might give you a higher return but in the long run, these stocks will just give you worries. Read the Wall Street Journal or watch the stock reports on news networks to know more about your stocks. Also check relevant websites to see how your stocks have been performing in recent weeks.