subject: Understanding The Stock Market Basics [print this page] Anyone wishing to invest in shares should have a good understanding of the stock market basics in order to invest their hard-earned money wisely and safely in good quality stocks.
A stock essentially represents a share of ownership in a company. The higher the percentage of your shareholding in the company, the greater is your ownership in it.
Profits of every limited company are distributed among the owners based on the percentage of their shareholding or stockholding in the company.
Each shareholder of a company has a right to cast his or her vote to appoint the board of directors who oversee the running of the business.
Larger stakeholders usually have a greater say in the way the company manages its day-to-day affairs, although the decision making lies with the board of directors and the CEO.
Shares of publicly traded companies can be bought or sold in the open market, which is known as a stock exchange. In such an exchange, anyone who is a legitimate citizen of the country has the right to buy or sell shares at the prevailing market price of the day.
Authorized brokers who act as the middlemen and charge commissions for their services facilitate this buying or selling of shares.
With the advent of Internet, there is a large number of online stock brokers with whom it is possible to trade in the market over the Internet, without having to visit the broker or the exchange physically.
Many investors who engage in regular trading of shares in the secondary market need to analyze the day-to-day position of different stocks and the financial data of companies in which they plan to invest or exit from.
To make their task easy, there is a good range of stock market software available nowadays that can automate the data and provide quick financial analysis.
It is a useful tool that can help in decision making, but the ultimate decision making involves a careful evaluation of the short term and long term prospects and fundamentals of the company in question.
People who are new to the stock trading business may do better if they enroll in some good stock market courses, whether offline or online. Both options are available and one may choose a course as per convenience.
It can help to clear the stock market basics and give provide some useful tips, techniques and strategies on how to make a profit by trading in equities. Joining one or two good stock market forums may also help to improve the understanding of the market.
For people who do not have much idea of trading in stocks and who lack in confidence should avoid investing their money in the secondary market for day to day trading.
For them a better way to indulge in shares would be by way of applying for stocks in the primary market through public issues. Furthermore, such people may also invest in mutual funds where professional traders manage the funds of investors and usually provide fair returns on investment.
