Stocks Market Education Basics
Welcome to The Stock Market Basics introduction to the stock market tutorial, a course designed to give new investors an understanding of the market and how things work before jumping into their first trade or investment. Let`s get started with the very basics.
There are many ways to profit from the stock market: dividends, capital gains, stock options, and riding a bull market as it goes higher. Many people are unaware of the entire investing concept, saving their money in a bank account and wondering why they’re not getting any interest. We will begin with the question “Why invest?” and progress into more detailed information about the stock market, how it works, and how you can make money by participating in it if you do it right.
Think back ten years ago. How much for a bag of coffee? How much did it cost to fill up your gas tank? What was your electrical bill or gas bill?
For that matter, what was your house worth, or your car? Now ask yourself all of the same questions from 20 years ago.
If you had $10,000 sitting in a bank account ten years ago and you never touched it, maybe you would have $10,500 today. Would $10,500 buy you the same amount of goods or services that $10,000 would have bought you ten years ago? In other words, would it have the same buying power?
Why Invest in Stocks?
Stocks are the “growth” portion of an investment portfolio. The shares have the potential to appreciate (or grow) in value. If you hold a stock that appreciates and then later sell it for more, you realize a “capital gain” which is treated favorably to ordinary income with respects to taxation.
How the Stock Market Works?
The stock market is an exchange where pieces of companies are bought and sold. An exchange is like a marketplace, flea market or bazaar where buyers and sellers meet to exchange goods and negotiate prices. Rather than physical goods being bought and sold, it is pieces of companies.
All stock trading activity used to be done in a “trading pit” environment where traders shouted at each other furiously, holding up pieces of pieces of paper and throwing them up in the air in excitement. At the end of the day the place was a total mess.
Types of Stocks
Each publicly listed company has its own unique share structure. All companies have common shares which entitles you to the standard shareholder rights. Some companies also have preferred shares, which are “preferred” in the sense that they have priority in terms of dividend payments but usually do not entitle the shareholder to voting rights.