Steps On How To Invest In The Stock Market

The stock market is the most intelligent investment

. When you purchase stock, you're buying a little piece of a corporation - likely a public corporation, one in which anyone could purchase stock.

Stock is priced by the share; you can check up on the price of a share of the stock - the share's value - every day in the business part of the newspapers. When the price sky rockets, you've made money. When it drops, you've lost. It's so simple.

But what stock should you buy? If you have some inside knowledge about a company, or about an industry, you must be in a better position than other people to predict the value of that stock. If you know that it looks like the stock will do good in the future, you'll want to take advantage of your expertise by buying a few shares. Call the businesses Investor Relations department and buy through its direct purchase plan. They'll want a certain sum up front, probably regular purchases through automatic withdrawals from your bank account too.

However, not all businesses have a purchase plan. In this case, you might investigate to see if they offer a dividend reinvestment plan (DRP or DRIP). In a DRP plan, dividends from stock you already own are automatically reinvested in the company for you. Of course, you'll need to own stock in the business in the first place for this option.

The advantage of buying stocks directly is that you save a broker's fee. However, for nearly all of us, the best course is to buy through a broker/advisor, or a full-service broker, particularly if we're thinking of investing substantial sums. There's risk in all investments, and your broker will know where to place your money to minimize risk and maximize potential gain. There's always a trade-off between risk and potential gain, and the balance can get very complicated. Your broker will know how to balance your stock portfolio; he'll combine stocks in such a way as to minimize the overall risk you're taking.

If you do not have the time to go to every stockholder's meeting of a corperation, to monitor the company's market, to anticipate the prices its providers are going charge. It's the job of your broker to be in touch with the financial analysts who does the research. They will make them work for you.

However, you may enjoy doing research, needed to make wise investments. If you want to make investment decisions yourself and you want to consider all stocks - not just those with direct purchase plans - you'll want a discount broker. They will honor your choices plus handle the stock for you at a lower commission than what a full-service broker would.

by: Karri Owens

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