subject: The Critical Factors You Need To Know To Make Money In The Stock Market ! [print this page] Buying stocks is easyBuying stocks is easy. But forking over the money now and then selling the stock later for profit is a lot harder. Learning when to buy and sell is a talent that comes from experience -- not just one article. But if you just want to learn how to buy and sell stocks and you're willing to invest a little time, keep reading to learn more!
Step one -- can you define "stock?" Ownership of a corporation that is represented by shares is the definition of stock. You might hear stock and "equity" used interchangeably. When you own shares of stock or equity in a company, that means you own part of that company. Even if your share in the company seems very minor, it still entitles you to a stake in the assets and earnings.
Stocks are bought and sold through an exchange. An exchange is an organization specifically designed to handle the buying and selling of stocks, options, bonds and futures. Membership in the exchange, or having what's called a "seat," is required if you want to buy stock. But don't expect to run out and buy a seat on an exchange. The price tag can run into the millions of dollars. Finding a company that already has a seat on the exchange provides the solution for most of us. One solution is to use a company that already has a seat on the exchange.
When you own stock, you are entitled to certain rights and privileges. Selling your current shares is one option. A second is to transfer them to another person or entity. And you can also add to your holdings by buying more shares. Very often, owning stock means you'll also get a chance to vote on company issues. But just how much of a voice you'll get will probably be based on your holdings.
Since you now have a stake in the company, you should know that you have a right to be informed. Most companies will mail notices whenever corporate changes are made. In the case of dividends, how you're paid depends on the board of directors. It can vote to pay shareholders in either cash or stock dividends. But you'll only receive dividends if your stock pays them -- and only if the company has made a profit and has money to spend.
There are two major types of stocks traded -- Common Stock and Preferred Stock.
Common Stock is more popular than Preferred Stock. One aspect of being an owner of common stock is that you share in both the risk and reward of the company. If the company's value goes up, so will your stock. If the company pays dividends, you may receive them as either cash or stock dividends. If you own common stock, you will most likely also have voting rights. Some of the issues you might get to help decide through a proxy are management decisions and corporate policies.
As a preferred stock owner, you'll have a stake in corporation. But you'll get a few more benefits. Preferred stockholders are first in line to receive dividends -- even before common shareholders see a cent. If the corporation goes out of business, creditors collect first. Next in line for any remaining assets are the preferred stockholders. Essentially, this places the preferred stockholders ahead of common shareholders when it comes to collecting any remaining assets. On the other hand, common stock is likely to see higher increases in price than preferred stock. And if you're concerned about having a voice in company matter, don't opt for preferred stock. It does not come with voting rights.
Next -- open a stock trading account so you can buy and sell stocks. While there are many brokers available online, you will probably want to work with what is called a "discount broker". In your search online, you'll also find something called "deep discount brokers." These offer cheaper per trade commissions. Make sure you research several brokers before making your final decision. Good luck!
