Don't Understand The Stock Market ? Well, Here Is Some Critical Factors You Need To Know To Make Mon

Buying stocks is easy

Buying stocks is easy. What's not so simple is to buy stocks now -- and then sell later for a profit. The ability to know when to buy and sell is a skill that comes from more than reading this one article. But if all you want is to learn the basics of buying and selling, then set aside a little time and keep reading!

First and foremost, what is "stock?" Stock is the ownership of a corporation that is represented by shares. You might hear stock and "equity" used interchangeably. To own stock or equity in a company means that you own a share of the company. As a shareholder, you are entitled to a stake in the corporation's assets and earnings. It doesn't matter how small or insignificant your holdings may seem.

All stock purchases and sales go through an exchange. An exchange is an organized marketplace designed specifically to buy and sell stocks, options, bonds and futures. Membership in the exchange is required before you can buy or sell stock. It's also referred to as having a "seat." For most of us, though, this just isn't realistic; the price for a seat on an exchange can run into the millions. Another method for buying and selling stocks is to use a company or other entity with a seat on the exchange.

You can expect certain rights and privileges if you own stock. If you decide you no longer want your shares, you can sell or transfer them to another person. But you can also increase your stake by buying more. Owning stock may also mean that you can actually have a say and vote on corporate issues. How much your vote counts may depend on how large -- or small -- your holdings ere.

Since you're an owner, it's also your right to be informed. So expect to receive notices whenever corporate changes take place. The board of directors makes the decision on another very important subject -- dividends. It can decide to pay shareholders in either cash or stock dividends (if the company had a profit and has money to spend.

As you start to research stocks, you'll find two types -- Common Stock and Preferred Stock.

Of the two, Common Stock is the most popular stock traded. You can expect to share in two important areas as a common stock owner: both the risks and rewards of the company. And if the company's stock values rises, so, most likely, will your stock. If you are entitled to dividends, you may receive them as either cash or stock dividends. As an owner of common stock, you will usually also get voting rights. You will be allowed to cast your vote on management decisions and corporate policies through a proxy.

If you opt for preferred stock, you'll still have a stake in a corporation, but you'll also get some additional perks. Dividends are paid first to preferred shareholders, then to common shareholders. Preferred stockholders must stand in line behind creditors in the event the corporation goes out of business. Only then will they be entitled to any remaining assets. Essentially, this places the preferred stockholders ahead of common shareholders when it comes to collecting any remaining assets. However, when it comes to increased stock prices, you can expect better results from common stock. But don't expect to see common stock and preferred stock perform the same way. Keep in mind, too, that you will not have a say in company matters with preferred stock. It does not come with voting rights.

Your next step is to open a stock trading account so you can do what you came here to do -- buy and sell stocks! As you're searching for brokers on-line, keep an eye open for something called a "discount broker." Another type of broker you'll find online is a "deep discount broker." These charge lower per trade commissions. Always make sure you research several brokers before choosing one. Good luck!

by: Gen Wright

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