subject: Information For New Stock Investors [print this page] If you are new to investing and want to start getting into the stock market then here is a short guide which can help you understand it and how it actually works.
Stocks are basically shares of a company, by investing into a stock you are investing into different companies. For instance if you buy KO you are investing into Coca-Cola stock. The stock market is simply the place where these shares of stocks in different companies are bought and sold on a consistent basis.
There are two ways to make money from the stock market, one is through dividends and the other is through appreciation.
Let's look at appreciation first because that is the most important. If you buy a stock and it goes up then you can sell it for more then you bought it for giving you a profit. One of the major stock tips out there is to invest into strong companies that you can understand and which are trading at a low price.
There are a number of ratios such as the PE ratio and Book Value that give you an idea on how expensive (or inexpensive) a given stock is. Looking at those ratios along with financial documents like the balance sheet can give you a good indication of just how stable a given company is.
The second way of making money in the stock market is through dividend paying stocks. Some companies will share their earnings with the owners of their companies. They do this through issuing dividends and it can be a very nice way of building some extra income.
Both of these methods can work out pretty nicely together. If you invest into fundamentally strong stocks then they will probably increase in value as time goes by. They will also probably pay out a very good dividend on the side which means you can make money in both ways. It is a long term approach but it can pay out pretty nicely.
Over the long run this can be a fantastic way of investing your money and is definately worth looking into.
