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A Primer to Making Money in the Stock MarketBY: Guest | Category: Finance | Post Date: 2010-01-30
While many of us took a class on economics in high school, the intricacies of the stock market were never fully explained to us. Thankfully, making money in the stock market doesn't require a vast knowledge of the market or a PhD. in Economics. Instead, the best tools that you can have when investing in the stock market are common sense, a clear objective, and an understanding of the principles of the stock market. Think of stocks as pieces of a company. The value of the company increases as the stock prices increase. Many different things can affect the value of a stock. Data from profit of previous years or quarters, rumors about a change in leadership or vision, new products or services being released, and new contracts can all affect the stock market. The goal of buying stock is to 'buy low, sell high.' This phrase shows that you should attempt to buy stock when the price is low, and then sell it when you think that it is as high as it is going to go. The difference between the two prices is the amount of profit that you are going to make on the trade. Another way to make money off of the stock market is through dividends. Dividends are payments that companies make to shareholders. These payments are based on the amount of money that the company made in the prior year, as well as on the percentage of the company that you own. This percentage is determined by the number of shares that you own. Companies make these payments when they make a profit. Though companies have a choice as to whether they pay dividends or reinvest the profit back into the company (known as 'retained earnings'), most companies will do a combination of both of these. There are many different strategies to consider when investing. One way is through looking at the financial statements and general trends of the company, as well as the trends of the industry. This method is called 'fundamental analysis.' Another method is called 'technical analysis.' This method focuses more on the market itself by looking at numeric trends of the company and others like it. A third method is the 'index method.' The index method looks at the overall stock market and attempts to follow its trend by creating a diversified portfolio with stocks from different companies, industries, and risk groups. If you decide to start participating in the stock market, make sure to get some advice from a certified stock broker. He/she will be able to assist you in the more technical aspects of the stock market, and can give you important information on how to avoid unwise or illegal activities like insider trading. If you'd like to test your skills in the stock market before actually risking your finances, try playing a game over the next few weeks (or months). Start an excel spreadsheet with a few different stocks that you are interested in. Write down the starting price and the number of shares that you are 'buying.' Over the next few weeks, follow the activities of those businesses both in the news and in the stock market. Then make decisions on what to do with the stock just as you would if you had real money at stake. While there is never a guarantee that if you make money once in the stock market, that you will make money again, this will give you a taste of the ups and downs of the market before you make a real commitment. Article Source: http://www.writearticles.org About Author / Additional Info: Additional Articles: * A Primer to Making Money in the Stock Market * Protect Yourself From Elbow Injuries * Useful tips for prevention of baldness of scalp * Retirement: Things to consider before you retire. * Foods Galore This Christmas Does this article violate or infringe on your copyright ? It is a violation of our terms for authors to submit content which they did not write and claim it as their own. If this article infringes on your copyrights, then use our Contact us form with the detailed proof of infringement along with the offending article's title, URL and writer name. If you do not hear back from us then contact us again in another 10 days. Thank you. Comments on this article: (0 comments so far) * Additional comments are now closed for this article *
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