It is often, if not always, really hard to begin with something. Especially if that something is completely new for you and you have no previous experience. Most important factors are good will, persistence and dedication. If you put in hard work, it will definitely repay, no matter what you do. For example the stock market is a mystery for a lot of people, but that is only because they are not familiar with the matter, and once they go into it, they realize that it is not that complicated.

What is a stock or share?

First of all you need to know what exactly is a stock or share of a company. It is a piece of the company, a small percentage of the whole company, and if you buy it, you own that percentage of that particular company. Companies usually issue shares when they need to raise money for something. Then the company keeps the money it raised by selling those stocks, while the shares continue to exchange.

Image credit forbes.com

How does stock market work?

Stocks are mostly traded on exchanges. Exchanges are places where buyers and sellers can meet and make an arrangement on a price. These exchanges can be either physical or virtual, depending on what kind of stock trading you do, and what your clients require. Stock market links buyers and sellers and its sole purpose is to facilitate the exchange of securities between them. It is almost impossible to imagine how hard it would be if you had to search for sellers or buyers for your stocks by yourself, at work, downtown or around your neighborhood.

You probably ask yourself why would a company want to sell its own assets and earnings and share them with someone else? Well, the reason is simple- because the need the money. There are only two ways for company to gather enough money for business growth and expansion. One way is to borrow the money, from the bank or in some other way, or they have another way, which is selling stocks. First one is called debt financing and the second one is equity financing. Both of these ways have their own pros and cons.

Best way to use stock market

First of all you need to realize that stocks are not just pieces of paper, but pieces of a real company, a company owned by you and other shareholders. You also need to know that there are many different companies with many different sizes out there. As bigger and stronger the company is, the bigger is the investment, while smaller ones are usually cheap. Stock prices rise and fall simultaneously with the company’s  earnings, but you need to know that a great track record does not guarantee strong performance and everything is based on predictions. Sometimes even the best companies can slip and you end up losing your money.

It is always smarter to buy stocks that are standing good for a longer period of time than to engage in rapid-fire trading. It can turn out good, but you never know. It is a high risk high reward game. If you are a beginner it is better to start safe and smart and not take any chances until you learn more about the market.

 

 

 

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Posted by Dan Radak

Dan Radak is a Web Hosting security professional, with ten-year experience. He collaborates with a number of companies in the field of online security. Currently, closely collaborating with a couple of e-commerce companies. Lately interested in web design. In his free time he makes beer at his home or fishing.