Is the Stock Market for You?
Many people would like to diversify their portfolios to expand their holdings. Making it big in the stock market has been a dream for many people who want to strike it rich. Many movies and books have been made portraying the ins and outs of the stock market, for some, dealing with the stock market can be very complex and complicated. There are many things needed to be understood and learned. In this article, a short overview will be provided to better understand the stock market and see the stock market is an option you would like to try.
When the stock market is concerned, you will hear terms such as stock options, stock index futures, convertibles and such. This could be quite confusing to the greenhorn but for some this is what they breathe day in and day out. To begin with, the stock market is the venue where publicly open company stocks are traded, bought and sold. The term stock market deals with all the stocks being traded all over the world. Most countries have their own stock market where in they deal with the financial instruments their country has. For example, in the United States, there is the NYSE, NASDAQ and Amex stock. Large companies though have been known to be traded in many places.
From the start, stock markets could be traded on the "trading floors" of a stock exchange where people would shout their tradings. As the market grew larger with more companies going public and with the availability of the internet, the stock market tradings can be done electronically online. Here, the prices of the shares of each company can be seen if any changes happen real time. All business dealings with the stock exchange and the brokers can be done even if they are not on the floors of the stock exchange.
Anyone can invest in the stock market. Before, individuals such as businessmen and people with money to invest dominated the stock market investors, now, large corporations and companies have become buyers and sellers. These "institutional" investors have increased the stock market making it a very good investment. Takeovers and merges have been a deciding factor in the rise and fall of the stock prices for these companies. Generally, investors can buy shares of the companies that have been opened to the public for trading. These shares represent a portion of the company and investors are called stockholders. These means that they own part of the company. The prices are determined by the growth of the company and their profits and success or by its losses as well. The movements of the prices of the stocks of company can be seen on stock market indices. Stock markets have stock market indices to provide that all important information of the price movement to the brokers and the investors.
Many people consider the stock market to be a very risky venture. As the prices drop and rise, your investment is on a roller coaster ride. There is no guarantee that the value of your stocks will go up. This is especially on cases stocks of companies that are just starting, but with the higher risk comes the bigger payoff. If the company makes it big you make a big profit. Stocks for starting companies are low and when it becomes a success, the prices will rise up. Large and well established companies and corporations have better chances with having their stocks growing.
Seasoned traders use many methods of analysis to see the trend of the growth of the company and their valuation. This way they can predict if the price of the stocks will go down or up. This movement of the price will determine whether they want to buy or sell the stock of a certain company. This will also determine the dividends the stock will pay. Dividends are the payment each stockholder receives from the profit of the company where he has invested in. Every year, the net profit of the company is divided among the shares of stocks existing.