To the untrained eye, the stock market is a mysterious and complex weave of numbers, abbreviations, and symbols. A simplified explanation would be to say that the stock market is a public trading market in which pieces of a company are bought and sold in a repetitive cycle of commerce.
Easily mistaken for a gamble, investing in the stock market is no gambling exchange. When an individual is gambling, they place their bet, and they may lose everything, or they will win. Trading stocks almost never results in an individual losing their entire investment.
The price of the stock may rise or fall, but the investment is not completely lost unless a business goes completely out of commission. Therefore, stock trading is simply a battle of wits and instincts pertaining to business. Take a look at a few more pieces of basic information that every novice investor should understand when tackling the stock market.
A few basics on reading stock market reports
There are a few common elements an individual will encounter on any stock report. Some of those include: The 52-week highs and lows, the alphabetical abbreviation/name of the stock, dividend per share, dividend yield, and price/earnings ratio.
Understand the nature of trading stocks
Trading on the stock market is not like trading baseball cards with a buddy: It is an adversarial system or trading. One investor will lose something in every trade, therefore traders are looking to be on the winning side of the deal.
Both investors cannot be correct, which is exactly why it is so crucial to be well versed on each and every investment considered. Haphazard trading will not end well.
What really makes a stock price fluctuate
Several different factors contribute to the rise and fall of stock prices. The media’s view of a business, top-rated investors, Mother Nature, the social state of society, and much more.
The point is that even though trading on the stock market seems to be very business centered, it is beneficial to understand the social impact on pricing as well. The value of any trade stock relies heavily on its public image. If the people smell trouble on the horizon, a stock will likely fall in value.
Beginners should understand a few basic concepts
There are three basic concepts which every investment beginner should first understand.
Index funds and exchange-traded funds (ETFs) – These two investments are a beginners best hope for low-risk diversification.
Investment portfolios – A well-designed investment portfolio is imperative to success.
Time is of the essence – Unless something awful occurs, today is not the last day to trade stocks. Patience is an expensive virtue to master when it comes to the stock market.